-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KSiMquiBoG9yfsXIMedegyrD1/hc14VgCxzoWSoROhfHAUnqUwnIxiGDjvVDxOT5 XFqLijQo/kjSo26gG3cYIg== 0000837913-01-500036.txt : 20010816 0000837913-01-500036.hdr.sgml : 20010816 ACCESSION NUMBER: 0000837913-01-500036 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENUS INC CENTRAL INDEX KEY: 0000837913 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 942790804 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-62010 FILM NUMBER: 1714553 BUSINESS ADDRESS: STREET 1: 1139 KARLSTAD DRIVE CITY: SUNNYVALE STATE: CA ZIP: 94089-2117 BUSINESS PHONE: 4087477120 MAIL ADDRESS: STREET 1: 1139 KARLSTAD DRIVE CITY: SUNNYVALE STATE: CA ZIP: 94089-2117 S-3/A 1 doc1.txt As filed with the Securities and Exchange Commission on August 14, 2001 Registration No. 333-62010 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT Under The Securities Act of 1933 GENUS, INC. (Exact name of Registrant as specified in its charter) ----------------------------- California 94-2790804 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1139 Karlstad Drive Sunnyvale, CA 94089 (408) 747-7120 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) William W.R. Elder President and Chief Executive Officer Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 (408) 747-7120 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Mark Casillas Esq. RoseAnn M. Rotandaro, Esq. Jillianne Easter, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, CA 94304 (650) 493-9300 ----------------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ X ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE (1) AGGREGATE OFFERING PRICE REGISTRATION FEE (3) ======================================================================================================================== Common Stock, no par value. .. 2,541,785 $ 6.53 $ 16,597,856.05 $ 4,149.46 ======================================================================================================================== Common stock issuable upon exercise of Warrants . . 1,461,525(2) $ 6.53 $ 9,543,758.25 $ 2,385.94 ======================================================================================================================== TOTAL REGISTRATION FEES: $ 6,535.50 ========================================================================================================================
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c). Based on the average of the high and low prices of the common stock on May 30, 2001. (2) In accordance with Rule 416(a), this registration statement shall cover any additional securities that may be issued in connection with the terms of the securities which provide for a change in the amount of securities being issued to prevent dilution resulting from stock splits, stock dividends or similar transactions. (3) Entire amount previously paid, pursuant to Rule 457(a). The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the securities act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PROSPECTUS 4,003,310 Shares GENUS, INC. Common Stock This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission relating to the public offering of securities by the shareholders listed herein. The sale of these securities is not being underwritten. The selling security holders may sell the common stock from time to time in the over-the-counter market through the Nasdaq Stock Market, in privately negotiated transactions, through the writing of options on the shares, or through a combination of such methods of sale, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices relating to such prevailing market prices or at negotiated prices. We will not receive any of the proceeds from the sale of the shares by the selling security holders. However, to the extent the warrants are exercised through payment of the purchase price in cash, rather than a cashless exercise, we will receive the proceeds from such exercise. Our common stock is traded on the Nasdaq National Market under the symbol "GGNS." On August 10, 2001, the average of the high and low sale prices of one share of our stock on Nasdaq was $4.55. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS," COMMENCING ON PAGE 2. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is August 14, 2001. TABLE OF CONTENTS Page ---- Prospectus Summary 1 Risk Factors 2 Forward-Looking Statements 11 Proceeds 11 Selling Security Holders 12 Description of Equity Securities 16 Plan of Distribution 17 Legal Matters 19 Experts 19 Where You Can Find More Information 19 Information Incorporated by Reference 19 We have not authorized anyone to provide you with information different from that contained or incorporated by reference in this prospectus. The selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. Our executive offices are located at 1139 Karlstad Drive, Sunnyvale, California 94089, our telephone number is (408) 747-7120 and our internet address is www.genus.com. The information on our internet website is not incorporated by reference in this prospectus. PROSPECTUS SUMMARY This prospectus relates to resales of up to 2,541,785 shares of our issued and outstanding common stock, and 1,461,525 additional shares of common stock issuable upon exercise of warrants by shareholders listed under "Selling Securities Holders." We sold these securities in a private placement on May 17, 2001. This summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, especially the risks discussed under "Risk Factors" on page 2, and the "Information Incorporated by Reference" on page 19. GENUS, INC. Genus, Inc. supplies advanced manufacturing systems for the worldwide semiconductor industry and for related non-semiconductor industries. Semiconductor manufacturers use our equipment and process technology to produce integrated circuits, commonly called memory and logic chips, that are incorporated into a variety of products, including personal computers, communications equipment and consumer electronics. We pioneered the development of chemical vapor deposition for tungsten silicide thin films. The chemical vapor deposition process deposits a thin film of tungsten silicide or other materials in critical stages during the manufacture of integrated circuits. We also lead in the commercialization of atomic layer deposition technology. This process enables a semiconductor manufacturer to deposit a layer of film that is one molecule thick, and repeat this process until the desired film thickness is achieved. Atomic layer deposition produces an extremely consistent and uniform film, which is required as the semiconductor industry migrates to feature sizes of 0.13 microns and smaller. The semiconductor industry currently manufactures integrated circuits with feature sizes of 0.15 microns and larger in width. However, the industry requires feature sizes of 0.13 microns and smaller for components such as gates, capacitors and interconnect materials and there are challenges associated with implementing the smaller features into volume production. These scaling challenges have been labeled as "red zones" by the International Technology Roadmap for Semiconductors because the industry has previously lacked workable solutions to further reduce feature sizes and simultaneously improve performance. The Semiconductor Roadmap strategically identifies red zones so that suppliers can respond with advanced technology. We have responded to red zones related to scaling challenges in the manufacture of chips with our atomic layer technology. We are one of the first two companies to supply systems commercially in this emerging market. We recently demonstrated our atomic layer deposition tool under continuous operating conditions and for 2000 wafers. These results were presented at the American Vacuum Society Science and Technology Conference on atomic layer deposition in Monterey in May 2001. In comparison to our demonstration of 2000 wafers, the nearest competitor has only demonstrated 500 wafers and has only reported data on 50 wafers. We have applied for 12 patents in this emerging technology. So far the U.S. Patent and Trademark Office has issued three patents to us in atomic layer deposition technology. Our remaining nine applications are still under review at this time. While atomic layer technology does not generate the majority of our current revenues, we expect it to become the major source of our revenues in the near future. Genus intends to focus on atomic layer deposition technology in building our future. The emerging atomic layer deposition segment of the semiconductor industry is expected to grow from approximately $35 million in 2001 to over $1 billion by 2006, due to the industry's demand for smaller chips. The advanced nature of our atomic layer technology 1 enables the first tier semiconductor companies to manufacture smaller chips for use in advanced and upcoming, or next-generation, applications. Our systems have already been accepted by three of the top ten chip manufacturers in that industry. Our current production platform is used for both the development and production phases of new thin films in integrated circuit manufacturing. Our Lynx series enables both 200 millimeter and 300 millimeter production and provides manufacturers with high reliability and low cost of ownership across a wide range of applications. Our modular design allows manufacturers to easily add capacity and service the manufacturing systems. Our systems operate on standardized software that supports a wide range of thin film deposition processes. The patented process chamber in our Lynx product family permits the configuration of chemical vapor deposition, plasma enhanced deposition, metal organic deposition and atomic layer deposition with minimal adjustment. Our global customer base consists of semiconductor and non-semiconductor manufacturers in the United States, Europe and Asia. Three of our current customers rank among the top ten semiconductor companies in the world, and include Infineon Technologies, Micron Technology, Inc., and Samsung Electronics Company, Ltd. Additionally, Read-Rite, a leading data storage company, uses our atomic layer deposition tools for non-semiconductor applications. 2 RISK FACTORS You should carefully consider the following risks before making an investment decision in our common stock. The risks described below are not the only ones that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, operating results or financial condition could be harmed by and the trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. You should also refer to the other information included in this prospectus and the other information, our financial statements and the related notes incorporated by reference into this prospectus before you decide to purchase shares of our common stock. WE HAVE EXPERIENCED LOSSES OVER THE LAST FEW YEARS AND WE MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN PROFITABILITY We have experienced losses of $9.6 million, $1.6 million and $29.5 million for 2000, 1999 and 1998, respectively. We may not be able to attain or sustain consistent future revenue growth on a quarterly or annual basis, or achieve and maintain consistent profitability on a quarterly or annual basis. SUBSTANTIALLY ALL OF OUR NET SALES COME FROM A SMALL NUMBER OF LARGE CUSTOMERS Historically, we have relied on a small number of customers for a substantial portion of our net sales. For example, Samsung Electronics Company, Ltd. and Micron Technology, Inc. accounted for 91% and 5% of our net sales in 2000. Samsung Electronics Company, Ltd. and Infineon Technologies accounted for 90% and 6% of total shipments made in 2000, which would have been recorded as revenue under the historical accounting method. Samsung and Infineon accounted for 88% and 9% of our sales for the first six months of 2001. In addition, Samsung Electronics Company, Ltd., and Infineon Technologies represented 92% of accounts receivable at December 31, 2000. Read Rite, SCS Hightech and Samsung Electronics represented 88% of gross receivables at June 30, 2001. The semiconductor manufacturing industry generally consists of a limited number of larger companies. We consequently expect that a significant portion of our future product sales will be concentrated within a limited number of customers. None of our customers has entered into a long-term agreement with us requiring them to purchase our products. In addition, sales to these customers may decrease in the future when they complete their current semiconductor equipment purchasing requirements. If any of our customers were to encounter financial difficulties or become unable to continue to do business with us at or near current levels, our business, results of operations and financial condition would be materially harmed. Customers may delay or cancel orders or may stop doing business with us for a number of reasons including: - customer departures from historical buying patterns; - general market conditions; - economic conditions; or - competitive conditions in the semiconductor industry or in the industries that manufacture products utilizing integrated circuits. 3 OUR QUARTERLY FINANCIAL RESULTS FLUCTUATE SIGNIFICANTLY AND MAY FALL SHORT OF ANTICIPATED LEVELS, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE Our net sales and operating results may fluctuate significantly from quarter to quarter. For example, in the year 2000, our quarterly revenues ranged from $3.8 million to $15.7 million with the bottom line ranging from a loss of $10 million to a profit of $1.6 million. We derive our revenue primarily from the sale of a relatively small number of high-priced systems, many of which may be ordered and shipped during the same quarter. Our results of operations for a particular quarter could be materially adversely affected if anticipated orders, for even a small number of systems, were not received in time to enable shipment during the quarter, anticipated shipments were delayed or canceled by one or more customers or shipments were delayed due to manufacturing difficulties. At our current revenue level, each sale, or failure to make a sale, could have a material effect on us. Our lengthy sales cycle, coupled with our customers' competing capital budget considerations, makes the timing of customer orders uneven and difficult to predict. Our backlog at the beginning of a quarter typically does not include all orders required to achieve our sales objectives for that quarter. As a result, our net sales and operating results for a quarter depend on us shipping orders as scheduled during that quarter as well as obtaining new orders for systems to be shipped in that same quarter. Any delay in scheduled shipments or in shipments from new orders would materially harm our operating results for that quarter, which could cause our stock price to decline. WE ARE SUBJECT TO RISKS BEYOND OUR CONTROL OR INFLUENCE AND ARE HIGHLY DEPENDENT ON OUR INTERNATIONAL SALES, PARTICULARLY SALES IN ASIAN COUNTRIES Export sales accounted for approximately 98%, 86% and 56% of our total net sales in 2000, 1999 and 1998, respectively, and accounted for 99% of our total net sales during the first six months of 2001. Net sales to our South Korean-based customers accounted for approximately 92%, 84% and 30% of total net sales, respectively and accounted for 88% of our total net sales in the first six months of 2001. We anticipate that international sales, including sales to South Korea, will continue to account for a significant portion of our net sales. As a result, a significant portion of our net sales will be subject to risks, including: - unexpected changes in law or regulatory requirements; - exchange rate volatility; - tariffs and other barriers; - political and economic instability; - difficulties in accounts receivable collection; - extended payment terms; - difficulties in managing distributors or representatives; - difficulties in staffing our subsidiaries; 4 - difficulties in managing foreign subsidiary operations; and - potentially adverse tax consequences. Our foreign sales are primarily denominated in U.S. dollars and we do not engage in hedging transactions. As a result, our foreign sales are subject to the risks associated with unexpected changes in exchange rates, which could affect the price of our products. In the past, turmoil in the Asian financial markets resulted in dramatic currency devaluations, stock market declines, restriction of available credit and general financial weakness. For example, prices fell dramatically in 1998 because some integrated circuit manufacturers sold dynamic random access memory chips, called DRAMs, at less than cost in order to generate cash. The cash shortfall caused Asian semiconductor companies to defer or cancel investments in new production facilities, thereby reducing our anticipated sales of our semiconductor manufacturing equipment in Asia in 1998. Also during this time, the value of the won, the currency of South Korea, declined significantly against the U.S. dollar. As a result, purchases of U.S. manufactured products became very costly. Since most of our sales were made to South Korean customers, these circumstances adversely impacted our customers' ability to invest in new facilities and equipment that reduced our shipments and profitability in 1998. Wherever currency devaluations occur abroad, our goods become more expensive for our customers in that region. Difficult economic conditions may limit capital spending by our customers. These circumstances may also affect the ability of our customers to meet their payment obligations, resulting in the cancellations or deferrals of existing orders and the limitation of additional orders. OUR SALES REFLECT THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY, WHICH COULD CAUSE OUR OPERATING RESULTS TO FLUCTUATE SIGNIFICANTLY AND COULD CAUSE US TO FAIL TO ACHIEVE ANTICIPATED SALES Our business depends upon the capital expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits and products utilizing integrated circuits. Although we are marketing our atomic layer deposition technology to non-semiconductor markets such as markets in magnetic thin film heads, flat panel displays, micro-electromechanical systems and inkjet printers, we are still very dependent on the semiconductor market. The semiconductor industry is cyclical and experiences periodic downturns both of which reduce the semiconductor industry's demand for semiconductor manufacturing capital equipment. Semiconductor industry downturns have significantly decreased our revenues, operating margins and results of operations in the past. During the industry downturn in 1998, several of our customers delayed or cancelled investments in new manufacturing facilities and equipment due to declining DRAM prices, the Asian economic downturn, and general softening of the semiconductor market. This caused our sales in 1998 to be significantly lower than in the prior three years. After the dramatic industry boom for semiconductor equipment that peaked early in the year 2000, another cyclical downturn is presently occurring. Industry reports anticipate a fall of 35% in 2001 compared to 2000. This sharp and severe industry downturn is the largest in the industry's history and it is occurring with a slowdown of the U.S. economy overall. Almost all previous downturns have been solely due to pricing declines. The current downturn in the industry marks a corresponding decline in unit production. Genus recently reported a loss for our second quarter 2001 financial results. There is a risk that our revenues and operating results will continue to be further impacted by the continued downturn in the semiconductor industry and global economy. 5 OUR FUTURE GROWTH IS DEPENDENT ON ACCEPTANCE OF NEW THIN FILMS AND MARKET ACCEPTANCE OF OUR SYSTEMS RELATING TO THOSE THIN FILMS We believe that our future growth will depend in large part upon the acceptance of our new thin films and processes, especially atomic layer deposition. As a result, we expect to continue to invest in research and development in these new thin films and the systems that use these films. There can be no assurance that the market will accept our new products or that we will be able to develop and introduce new products or enhancements to our existing products and processes in a timely manner to satisfy customer needs or achieve market acceptance. The failure to do so could harm our business, financial condition and results of operations. We must manage product transitions successfully, as introductions of new products could harm sales of existing products. We derive our revenue primarily from the sale of equipment used to chemically deposit tungsten silicide in the manufacture of memory chips. We estimate that the life cycle for these tungsten silicide CVD systems is three-to-five years. There is a risk that future technologies, processes or product developments may render our product offerings obsolete and we may not be able to develop and introduce new products or enhancements to our existing products in a timely manner. WE MAY NOT BE ABLE TO CONTINUE TO SUCCESSFULLY COMPETE IN THE HIGHLY COMPETITIVE SEMICONDUCTOR INDUSTRY AGAINST COMPETITORS WITH GREATER RESOURCES The semiconductor manufacturing capital equipment industry is highly competitive. We face substantial competition throughout the world. We believe that to remain competitive, we will require significant financial resources in order to develop new products, offer a broader range of products, establish and maintain customer service centers and invest in research and development. Many of our existing and potential competitors have substantially greater financial resources, more extensive engineering, manufacturing, marketing, customer service capabilities and greater name recognition. We expect our competitors to continue to improve the design and performance of their current products and processes and to introduce new products and processes with improved price and performance characteristics. If our competitors enter into strategic relationships with leading semiconductor manufacturers covering thin film products similar to those sold by us, it would materially adversely affect our ability to sell our products to such manufacturers. In addition, to expand our sales we must often replace the systems of our competitors or sell new systems to customers of our competitors. Our competitors may develop new or enhanced competitive products that will offer price or performance features that are superior to our systems. Our competitors may also be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of their product lines. We may not be able to maintain or expand our sales if our resources do not allow us to respond effectively to such competitive forces. WE MAY NOT ACHIEVE ANTICIPATED REVENUE GROWTH IF WE ARE NOT SELECTED AS VENDOR OF CHOICE FOR NEW OR EXPANDED FABRICATION FACILITIES AND IF OUR SYSTEMS AND PRODUCTS DO NOT ACHIEVE BROADER MARKET ACCEPTANCE Because semiconductor manufacturers must make a substantial investment to install and integrate capital equipment into a semiconductor fabrication facility, these manufacturers will tend to choose semiconductor equipment manufacturers based on established relationships, product compatibility and proven financial performance. 6 Once a semiconductor manufacturer selects a particular vendor's capital equipment, the manufacturer generally relies for a significant period of time upon equipment from this vendor of choice for the specific production line application. To do otherwise creates risk for the manufacturer because the manufacture of a semiconductor requires many process steps and a fabrication facility will contain many different types of machines that must work cohesively to produce products that meet the customers' specifications. If any piece of equipment fails to perform as expected, the customer could incur significant costs related to defective products, production line downtime, or low production yields. Since most new fabrication facilities are similar to existing ones, semiconductor manufacturers tend to continue using equipment that has a proven track record. Based on our experience with major customers like Samsung, we have observed that once a particular piece of equipment is selected from a vendor, the customer is likely to continue purchasing that same piece of equipment from the vendor for similar applications in the future. Our customer list, though limited, has expanded in recent months. Yet our broadening market share remains at risk to choices made by customers that continue to be influenced by pre-existing installed bases by competing vendors. A semiconductor manufacturer frequently will attempt to consolidate its other capital equipment requirements with the same vendor. Accordingly, we may face narrow windows of opportunity to be selected as the "vendor of choice" by potential new customers. It may be difficult for us to sell to a particular customer for a significant period of time once that customer selects a competitor's product, and we may not be successful in obtaining broader acceptance of our systems and technology. If we are not able to achieve broader market acceptance of our systems and technology, we may be unable to grow our business and our operating results and financial condition will be harmed. OUR LENGTHY SALES CYCLE INCREASES OUR COSTS AND REDUCES THE PREDICTABILITY OF OUR REVENUE Sales of our systems depend upon the decision of a prospective customer to increase manufacturing capacity. That decision typically involves a significant capital commitment by our customers. Accordingly, the purchase of our systems typically involves time-consuming internal procedures associated with the evaluation, testing, implementation and introduction of new technologies into our customers' manufacturing facilities. For many potential customers, an evaluation as to whether new semiconductor manufacturing equipment is needed typically occurs infrequently. Following an evaluation by the customer as to whether our systems meet its qualification criteria, we have experienced in the past and expect to experience in the future delays in finalizing system sales while the customer evaluates and receives approval for the purchase of our systems and constructs a new facility or expands an existing facility. Due to these factors, our systems typically have a lengthy sales cycle during which we may expend substantial funds and management effort. The time between our first contact with a customer and the customer placing its first order typically lasts from nine to twelve months and is often even longer. This lengthy sales cycle makes it difficult to accurately forecast future sales and may cause our quarterly and annual revenue and operating results to fluctuate significantly from period to period. If anticipated sales from a particular customer are not realized in a particular period due to this lengthy sales cycle, our operating results may be adversely affected for that period. OUR INTELLECTUAL PROPERTY IS IMPORTANT TO US AND WE RISK LOSS OF A VALUABLE ASSET, REDUCED MARKET SHARE AND LITIGATION EXPENSES IF WE CANNOT ADEQUATELY PROTECT IT. Our success depends in part on our proprietary technology. There can be no assurance that we will be able to protect our technology or that competitors will not be able to develop similar technology independently. We currently have a number of United States and foreign patents and patent applications. On 7 August 1, 2001, we filed a counterclaim against ASM International N.V., charging ASM with infringing Genus' U.S. Patent 5,294,568, entitled "Method of Selective Etching Native Oxide," and with committing antitrust violations designed to harm the atomic layer deposition market. There can be no assurance that any patents issued to us will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide us with competitive advantages. IF WE ARE FOUND TO INFRINGE THE PATENTS OR INTELLECTUAL PROPERTY OF OTHER PARTIES, OUR ABILITY TO GROW OUR BUSINESS MAY BE SEVERELY LIMITED. From time to time, we may receive notices from third parties alleging infringement of patents or intellectual property rights. It is our policy to respect all parties' legitimate intellectual property rights, and we will defend against such claims or negotiate licenses on commercially reasonable terms where appropriate. However, no assurance can be given that we will be able to negotiate necessary licenses on commercially reasonable terms, or at all, or that any litigation resulting from such claims would not have a material adverse effect on our business and financial results. On June 6, 2001, ASM America, Inc. filed suit against us in the U.S. District Court for the Northern District of California asserting that our atomic layer deposition products infringe claims of U.S. Patent Nos. 6,015,590 and 5,916,365. The complaint sought unspecified monetary damages and equitable relief. On August 1, 2001, we filed our response in the patent infringement case initiated by ASM denying ASM's allegation that Genus infringes patents that ASM claims to have acquired. In our response, we deny ASM's and maintain that ASM's claims based on these patents are improper. We intend to defend our position vigorously. The outcome of any litigation is uncertain, however, and we may not prevail. Should we be found to infringe any of the patents asserted, in addition to potential monetary damages and any injunctive relief granted, we would need either to obtain a license from ASM to commercialize our products or redesign our products so they do not infringe any of these patents. If we were unable to obtain a license or adopt a non-infringing product design, we may not be able to proceed with development, manufacture and sale our atomic layer products. In this case our business may not develop as planned, and our results could materially suffer. WE ARE DEPENDENT UPON KEY PERSONNEL WHO ARE EMPLOYED AT WILL, WHO WOULD BE DIFFICULT TO REPLACE AND WHOSE LOSS WOULD IMPEDE OUR DEVELOPMENT AND SALES We are highly dependent on key personnel to manage our business, and their knowledge of business, management skills and technical expertise would be difficult to replace. Our success depends upon the efforts and abilities of Dr. William W.R. Elder, our chairman and chief executive officer, Dr. Thomas E. Seidel, our chief technology officer, and other key managerial and technical employees who would be difficult to replace. The loss of Dr. Elder or Dr. Seidel or other key employees could limit or delay our ability to develop new products and adapt existing products to our customers' evolving requirements and would also result in lost sales and diversion of management resources. None of our executive officers are bound by a written employment agreement, and the relationships with our officers are at will. Because of competition for additional qualified personnel, we may not be able to recruit or retain necessary personnel, which could impede development or sales of our products. Our growth depends on our ability to attract and retain qualified, experienced employees. There is substantial competition for experienced engineering, technical, financial, sales and marketing personnel in our industry. In particular, we must attract and retain highly skilled design and process engineers. Competition for such personnel is intense, 8 particularly in the San Francisco Bay Area where we are based. If we are unable to retain our existing key personnel, or attract and retain additional qualified personnel, we may from time to time experience inadequate levels of staffing to develop and market our products and perform services for our customers. As a result, our growth could be limited due to our lack of capacity to develop and market our products to customers, or fail to meet delivery commitments or experience deterioration in service levels or decreased customer satisfaction. OUR FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD RESULT IN SUBSTANTIAL LIABILITY TO US We are subject to a variety of federal, state and local laws, rules and regulations relating to the protection of health and the environment. These include laws, rules and regulations governing the use, storage, discharge, release, treatment and disposal of hazardous chemicals during and after manufacturing, research and development and sales demonstrations. If we fail to comply with present or future regulations, we could be subject to substantial liability for clean up efforts, property damage, personal injury and fines or suspension or cessation of our operations. We use the following regulated gases at our manufacturing facility in Sunnyvale: tungsten hexafluoride, dichlorosilane silicide, silane and nitrogen. We also use regulated liquids such as hydrofluoric acid and sulfuric acid. The city of Sunnyvale, California, imposes high environmental standards to businesses operating within the city. Genus has met the city's stringent requirements and has received an operating license from Sunnyvale. Presently, our compliance record indicates that our methods and practices successfully meet standards. Moving forward, if we fail to continuously maintain high standards to prevent the leakage of any toxins from our facilities into the environment, restrictions on our ability to expand or continue to operate our present locations could be imposed upon us or we could be required to acquire costly remediation equipment or incur other significant expenses. WE DEPEND UPON A LIMITED NUMBER OF SUPPLIERS FOR MANY COMPONENTS AND SUBASSEMBLIES, AND SUPPLY SHORTAGES OR THE LOSS OF THESE SUPPLIERS COULD RESULT IN INCREASED COST OR DELAYS IN THE MANUFACTURE AND SALE OF OUR PRODUCTS Components and sub-assemblies included in our products are obtained from a single supplier or a limited group of suppliers. Disruption or termination of these sources could have an adverse effect on our operations. We believe that alternative sources could be obtained and qualified to supply these products, if necessary. Nevertheless, a prolonged inability to obtain components could have a material adverse effect on our operating results. WE DEPEND UPON SIX INDEPENDENT SALES REPRESENTATIVES FOR THE SALE OF OUR PRODUCTS AND ANY DISRUPTION IN THESE RELATIONSHIPS WOULD ADVERSELY AFFECT US We currently sell and support our thin film products through direct sales and customer support organizations in the U.S., Europe, South Korea and Japan and through six independent sales representatives and distributors in the U.S., Europe, South Korea, Taiwan, China and Malaysia. We do not have any long-term contracts with our sales representatives and distributors. Any disruption or termination of our existing distributor relationships could negatively impact sales and revenue. WE ESTABLISHED A DIRECT SALES ORGANIZATION IN JAPAN AND WE MAY NOT SUCCEED IN EFFECTIVELY PENETRATING THE JAPANESE MARKETPLACE We terminated our relationship with our distributor, Innotech Corp. in Japan in 1998. In 2000, we invested significant resources in Japan by establishing a direct sales organization, Genus-Japan, Inc. 9 Although we continue to invest significant resources in our Japan office and have received orders from two new Japanese customers in 2001, we may not be able to attract new customers in the Japanese semiconductor industry, and as a result, we may fail to yield a profit or return on our investment in Japan. THE PRICE OF OUR COMMON STOCK HAS FLUCTUATED IN THE PAST AND MAY CONTINUE TO FLUCTUATE SIGNIFICANTLY IN THE FUTURE, WHICH MAY LEAD TO LOSSES BY INVESTORS OR TO SECURITIES LITIGATION Our common stock has experienced substantial price volatility, particularly as a result of quarter-to-quarter variations in our, our competitors or our customers' actual or anticipated financial results, our competitors or our customers' announcements of technological innovations, revenue recognition policies, changes in earnings estimates by securities analysts and other events or factors. Also, the stock market has experienced extreme price and volume fluctuations which have affected the market price of many technology companies, in particular, and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions in the United States and the countries in which we do business, may adversely effect the market price of our common stock. In the past, securities class action litigation has often been instituted against a company following periods of volatility in the company's stock price. This type of litigation, if filed against us, could result in substantial costs and divert our management's attention and resources. BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure and other events beyond our control. A disaster could severely damage our ability to deliver our products to our customers. Our products depend on our ability to maintain and protect our operating equipment and computer systems, which is primarily located in or near our principal headquarters in Sunnyvale, California. Sunnyvale exists near a known earthquake fault zone. Although our facilities are designed to be fault tolerant, the systems are susceptible to damage from fire, floods, earthquakes, power loss, telecommunications failures, and similar events. Further, our facilities in the State of California are currently subject to electrical blackouts as a consequence of a shortage of available electrical power. In the event these blackouts continue or increase in severity, they could disrupt the operations of our affected facilities. Although we maintain general business insurance against interruptions such as fires and floods, there can be no assurance that the amount of coverage will be adequate in any particular case. WE ARE OBLIGATED TO ISSUE SHARES OF OUR STOCK UNDER OUTSTANDING OPTIONS AND WARRANTS AND SUCH ISSUANCE MAY DILUTE YOUR PERCENTAGE OWNERSHIP IN GENUS OR CAUSE OUR STOCK PRICE TO DROP. As of July 31, 2001, we have a total of 4,494,555 shares of common stock underlying warrants and outstanding employee stock options. Of the stock options, 1,558,729 shares are currently exercisable. All of the shares underlying the warrants are currently exercisable. There are 1,461,525 shares of our common stock underlying the warrants issued to the shareholders listed in the table below under the section entitled "Selling Securities Holders." Of these shares, 1,270,891 have an exercise price of $3.50; 69,375 have an exercise price of $3.00; and 121,259 have an exercise price of $5.24. In addition, Venture Banking Group, a division of Cupertino National Bank, holds a warrant, issued October 14, 1999, to purchase 25,000 shares of our common stock at an exercise price of $2.39. The warrants have terms providing for an adjustment of the number of shares underlying the warrants in the event that we issue new shares at a price lower than the exercise price of the warrants, where we make a distribution of common stock to our shareholders or effect a reclassification. 10 If all of the shares underlying the exercisable options and warrants were exercised and sold in the public market, the value of your current holdings in Genus may decline as a result of dilution to your percentage ownership in Genus or as a result of a reduction in the per share value of our stock resulting from the increase in the number of Genus shares available on the market, if such availability were to exceed the demand for our stock. WE HAVE IMPLEMENTED ANTI-TAKEOVER MEASURES THAT MAY RESULT IN DILUTING YOUR PERCENTAGE OWNERSHIP OF GENUS STOCK Please read the section below entitled "Description of Equity Securities" where we more completely summarize our preferred stock rights agreement, which is our primary anti-takeover device. Pursuant to the agreement, our board of directors has declared a dividend of one right for each share of our common stock that was outstanding as of October 13, 2000. The rights trade with the certificates for the common stock until a person or group acquires beneficial ownership of 15% or more of our common stock. After such an event, we will mail rights certificates to our shareholders and the rights will become transferable apart from the common stock. At that time, each right, other than rights owned by an acquiror or its affiliates, will entitle the holder to acquire, for the exercise price, a number of shares of common stock having a then current market value of twice the exercise price. In the event that circumstances trigger the transferability and exercisability of rights granted in our preferred stock rights agreement, your current holdings in Genus may decline as a result of dilution to your percentage ownership in Genus or as a result of a reduction in the per share value of our stock resulting from the increase in the number of outstanding shares available. FORWARD-LOOKING STATEMENTS We make forward-looking statements in this prospectus that may not prove to be accurate. This prospectus contains or incorporates forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding, among other items, our business strategy, growth strategy and anticipated trends in our business. We may make additional written or oral forward-looking statements from time to time in filings with the Securities and Exchange Commission or otherwise. When we use the words "believe," "expect," "anticipate," "project" and similar expressions, this should alert you that this is a forward-looking statement. We base these forward-looking statements on our expectations. They are subject to a number of risks and uncertainties, that cannot be predicted, quantified or controlled. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this prospectus, and in documents incorporated into this prospectus, including those set forth above in "Risk Factors," describe factors, among others, that could contribute to or cause these differences. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this prospectus will in fact transpire or prove to be accurate. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section. 11 PROCEEDS We will not receive any of the proceeds from the sale of the shares by the selling security holders. We have agreed to bear all expenses, other than selling commissions and fees and expenses of counsel and other advisers to the selling security holders, in connection with the registration of the shares being offered. We will indemnify the selling security holders against liabilities under the Securities Act of 1933, as amended. All proceeds from the sale of the shares will be for the account of the selling security holders. See "Selling Security Holders" and "Plan of Distribution." SELLING SECURITY HOLDERS The following table sets forth information with respect to the beneficial ownership by the selling security holders of shares of our common stock. We sold the selling security holders an aggregate of 2,541,785 shares of common stock and warrants to purchase an aggregate of 1,270,891 shares of common stock in a private placement on May 17, 2001. We also issued an aggregate of 190,634 warrants to Burnham Securities, Inc. and Wells Fargo Van Kasper as partial compensation for their services as placement agents in the transaction. The purchasers paid us $3.00 per share of common stock. The price was determined by considering the average of our historical closing bid prices, and the respective trailing trading average bid prices for a period of 20 days ending on May 4, 2001. The shares were sold at a 6% discount to this 20-day average. For each $6.00 paid to us in the private placement, purchasers received two shares of our common stock and one warrant. The number of shares underlying each warrant is determined by the number of shares purchased. The warrants issued to the purchasers in the private placement are exercisable for $3.50 per share. The placement agents have an aggregate of 69,375 shares underlying their warrants that are exercisable for $3.00 per share and an aggregate of 121,259 shares underlying their warrants that are exercisable for $5.24 per share. Each warrant is exercisable to purchase one share of our common stock at any time beginning May 14, 2001, the day of issuance, and ending May 13, 2006. The warrants include a net exercise provision permitting the holders to pay the exercise price by cancellation of a number of shares with a fair market value equal to the exercise price of the warrants. We may request the holders of the warrants issued to the purchasers in the private placement to exercise them if the closing price per share of our common stock is greater than $5.25 for each of the ten trading days immediately preceding the date we give notice to the holders of our decision to effect the exercise. Under the terms of this mandatory exercise provision, a holder can choose not to exercise his or her warrants, although such holder would then forfeit rights, title and interest under the warrants to the extent that he or she fails to exercise within thirty calendar days of receiving our notice. The warrants issued to the purchasers in the private placement include antidilution provisions under section 5, including provisions that call for adjustments in the number of shares of stock issued upon exercise of the warrants to prevent dilution to the holders of the warrants because of (i) dividends or distributions in common stock; (ii) reclassifications of the common stock; or (iii) the issuance of new stock at less than the exercise price of the warrants. The warrants issued to the placement agents differ from the warrants issued to the investors in the private placement in that the warrants issued to the placement agents (i) have no mandatory exercise provision; and (ii) require a more relaxed adjustment, called a broad-based adjustment which requires fewer additional shares to be issued to the shareholders to prevent dilution if Genus issues new stock at less than the exercise price of the warrant. Selling shareholders John P. Rosenthal, Richard Lewisohn and Irwin Silverberg are affiliates of Burnham Securities, Inc. Each purchased securities in the private placement in the ordinary course of business. At the time of the purchase of the securities they confirmed that none had agreements or 12 understandings, directly or indirectly, with any person to distribute the securities. See Section 3(a) of the Securities Purchase Agreement, which is filed as exhibit 4.1 to the Amended S-3. The securities offered by this prospectus consist of the shares of common stock acquired by the selling security holders in connection with the above-mentioned private placement and the shares of common stock issuable to them upon exercise of the warrants issued in that private placement. We entered into a registration rights agreement with the selling security holders in connection with the above-mentioned private placement that requires us to file this registration statement. 13
Securities owned Securities Securities owned prior to offering offered (2) after offering ------------------------------------------- --------- ------------------ Name of Selling Security Holder Number Shares Number Warrants Percent(1) Number Number Percent(1) Special Situations Private Equity Fund, L.P.(3). 359,896 179,948 2.42 539,844 0 0 Special Situations Technology Fund, L.P.(3). 239,931 119,965 1.61 359,896 0 0 Special Situations Fund III, L.P.(3) . 674,806 337,403 4.54 1,012,209 0 0 Special Situations Cayman Fund, L.P.(3). 224,935 112,467 1.51 337,402 0 0 James Gerson 37,000 18,500 * 55,500 0 0 Mangin Family L.P.(4) 47,800 17,800 * 53,400 12,200 * John P. Rosenthal (5) 172,800 37,000 * 111,000 98,800 * HAFF Partners L.P.(6) 130,803 25,401 * 76,204 80,000 * Gelfenbein Family L.P.(6) 114,500 37,000 * 111,000 40,500 * Roy R. Neuberger 74,000 37,000 * 111,000 0 0 Melanie Capital(7) 31,000 15,500 * 46,500 0 0 Forus Investments, Inc.(8) 34,500 11,250 * 33,750 12,000 * Richard Lewisohn III.(9) 11,066 5,533 * 16,599 0 0 Jerome A. Yavitz 57,000 22,500 * 67,500 12,000 * Irwin Silverberg (10) 129,600 17,250 * 51,750 95,100 * Delaware Charter (11) 107,700 7,500 * 22,500 92,700 * Morton Seaman 27,000 7,500 * 22,500 12,000 * Bedford Oak Partners, L.P. (12) 245,000 122,500 1.65 367,500 0 0 BayStar Capital, L.P.(13) 125,000 62,500 * 187,500 0 0 BayStar International, LTD.(13). 41,666 20,833 * 62,499 0 0 The Timken Living Trust UAD 9/14/99 (14) 111,082 55,541 * 166,623 0 0 Burnham Securities, Inc. (15) 59,096 * 59,096 0 0 Wells Fargo Van Kasper (16) 131,538 * 131,538 0 0 TOTAL 2,997,085 1,461,525 4,003,310 455,300
- -------------------------------- * Less than 1% of the outstanding shares of common stock. 1 Based on 22,269,117 shares outstanding as of July 31, 2001. 2 Consists of shares of common stock and shares of common stock issuable upon the exercise of warrants issued to the selling security holders in the private placement of May 17, 2001. 3 MGP Advisers Limited Partnership, a Delaware limited partnership, is the general partner of the Special Situations Fund III, L.P., a Delaware Limited Partnership. AWM Investment Company, Inc., a Delaware corporation, is the general partner of MGP and the general partner of and investment adviser to the Cayman Fund. MG Advisers, L.L.C. is the general partner of and investment adviser to Special Situations Private Equity Fund, L.P. SST Adviser, L.L.C. is the general partner of and investment advisor to Special Situations Technology Fund, L.P. Austin W. Marxe and David M. Greenhouse are the principal owners of MGP, AWM, MG and SSTA and are principally responsible for the selection, acquisition and disposition of the portfolio securities by the investment advisers on behalf of their fund. 4 Joseph Mangin is the beneficial owner, with voting and investment power, of the shares owned by Mangin Family LP. 14 5 Includes 5,000 shares of common stock held in a trust of which Mr. Rosenthal is the trustee and 15,200 shares of common stock held in a trading account in which Messrs. Rosenthal and Silverberg each own a 50% interest. Mr. Rosenthal, a Senior Vice President of Burnham Securities, Inc., disclaims beneficial ownership of shares held by, or managed in affiliation with, Burnham Securities, Inc. 6 Drew Gelfenbein is the President of Gledroy Management Corp., a Delaware Corporation. Gledroy Management Corp. is the General Partner of the Gelfenbein Family Partnership and HAFF Partners, which are organized in the state of Delaware. Drew Gelfenbein has the power to act and vote on behalf of the Gledroy Management Corp and consequently the Gelfenbein Family LP and HAFF Partners L.P. 7 Melvin Morse is the beneficial owner, with voting and investment power, of the shares owned by Malanie Capital. 8 Lou Spear is the beneficial owner, with voting and investment power, of the shares owned by Forus Investment, Inc. 9 Mr. Lewisohn, a Senior Managing Director of Burnham Securities, Inc., disclaims beneficial ownership of shares held by, or managed in affiliation with, Burnham Securities, Inc. 10 Includes 30,100 shares of common stock held in the name of Carol Silverberg, Mr. Silverberg's wife, and 15,200 shares of common stock held in a trading account in which Messrs. Rosenthal and Silverberg each own a 50% interest. Mr. Silverberg, a Senior Managing Director of Burnham Securities, Inc., disclaims beneficial ownership of shares held by, or managed in affiliation with, Burnham Securities, Inc. 11 Harold J. Kraus is the beneficial owner, with voting and investment power, of the shares owned by Delaware Charter. 12 Harvey Eisen is the beneficial owner, with voting and investment power, of the shares owned by Bedford Oak Partners, LP. 13 Michael A. Roth and Brian J. Stark are the beneficial owners, with voting and investment power, of the shares owned by BayStar Capital, L.P. and BayStar International, LTD. 14 William R. & Judy Timken are the beneficial owners, with voting and investment power, of the shares owned by The Timken Living Trust UAD 9/14/99. 15 Jon Burnham, CEO of Burnham Securities, Inc., is the agent who has been vested with the voting and investment power of the shares owned by Burnham Securities, Inc. 16 Robert L. Quist, Managing Director of Wells Fargo Van Kasper, is the agent who has been vested with the voting and investment power of the shares owned by Wells Fargo Van Kasper. In the private placement we further agreed, subject to the exceptions discussed below, that we would not conduct any additional financing until November 10, 2001 without the prior written consent of at least a majority of the selling security holders, and if the selling security holders did so consent, to offer them a right of first refusal to participate in such financing on the same terms. Our agreement does not require us to obtain the consent of the selling security holders or offer them a right of first refusal if we conduct any transaction involving 15 - issuances of securities as consideration in a merger, consolidation or acquisition of assets, or in connection with any strategic partnership, collaboration or joint venture (the primary purpose of which is not to raise capital), or as consideration for our acquisition of a business, product or license, - the issuance of securities pursuant to a widely distributed underwritten public offering, - the issuance of securities upon exercise or conversion of our options, warrants or other convertible securities outstanding on May 14, 2001 or issued in the private placement, - the issuance of warrants or shares of our common stock upon exercise thereof to Wells Fargo Van Kasper or its assigns in consideration of its services to us as placement agent for the private placement, - the grant of additional options or warrants, or the issuance of additional securities, under any duly authorized stock option, stock purchase or restricted stock plan for the benefit of our employees, consultants or directors, or - any financing with no equity or equity-linked securities made to us by a financial institution engaged in the business of lending money such as a bank, trust company, insurance company or other institutional lender. No selling security holder has held any position or office or had any other material relationship with Genus or any of our affiliates within the past three years. DESCRIPTION OF EQUITY SECURITIES Our authorized capital stock consists of 50,000,000 shares of common stock, no par value per share, and 1,982,000 shares of preferred stock, no par value per share. As of July 31, 2001, approximately 22,269,117 shares of our common stock were outstanding with 402 registered shareholders of record; no shares of our preferred stock were outstanding. As of July 31, 2001, there were 1,486,525 shares of our common stock underlying warrants and 3,001,965 shares of our common stock underlying outstanding employee stock options. The options include 1,558,729 shares that are currently exercisable and 1,443,236 shares that remain unvested. The holders of our common stock are entitled to one vote per share on all matters to be voted upon by the shareholders, except that upon giving the legally required notice, shareholders may cumulate their votes in the election of directors. The common shareholders are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. In the event that we liquidate, dissolve or wind up our operations, the holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of any preferred stock, that may be then outstanding. Our common stock has no preemptive or conversion rights or other subscriptions rights. There are no redemption or sinking fund provisions applicable to our common stock. All outstanding shares of our common stock are fully paid and non-assessable. ANTI-TAKEOVER MEASURES On September 7, 2000, our board of directors declared a dividend of one right for each share of our common stock outstanding as of the close of business on October 13, 2000 and directed the issuance of one right for each share of common stock that would become outstanding thereafter. We entered into a preferred 16 stock rights agreement with ChaseMellon Shareholder Services on September 26, 2000 that sets forth the terms and conditions of such rights. The rights will trade with the certificates for the common stock until a person or group acquires beneficial ownership of 15% or more of our common stock or after a person or group announces a tender or exchange offer which would result in another person or group owning 15% or more of our common stock. After such an event, we will mail rights certificates to our shareholders and the rights will become transferable apart from the common stock. At that time, each right will entitle the holder to purchase for an exercise price of $40.00, a fraction of a share of our preferred stock with economic terms similar to that of one share of our common stock. If an acquiror obtains 15% or more of our common stock, THEN each right, other than rights owned by an acquiror or its affiliates, will entitle the holder to purchase, for the exercise price, a number of shares of our common stock having a then current market value of twice the exercise price. If, after an acquiror obtains 15% or more of our common stock, (a) we merge into another entity, (b) an acquiring entity merges into us or (c) we sell more than 50% of our assets or earning power, THEN each right, other than rights owned by an acquiror or its affiliates, will entitle the holder thereof to purchase, for the exercise price, a number of shares of the acquiror's common stock having a then current market value of twice the exercise price. At any time after the date on which an acquiror obtains 15% or more of our common stock and prior to the acquisition of 50% of our outstanding common stock, a majority of our board of directors may exchange the rights for shares of our common stock at an exchange ratio of one share of common stock per right (subject to adjustment). We may redeem the rights for $0.001 per right at any time on or before the fifth day after public announcement that an acquiror attained beneficial ownership of 15% or more of our common stock. The rights expire on the earliest of (a) October 13, 2010 or (b) exchange or redemption of the rights as described above. The terms of the rights and the rights agreement may be amended in any respect without the consent of the rights holders on or prior to the distribution of the rights; thereafter, the terms of the rights and the rights agreement may be amended without the consent of the rights holders in order to cure any ambiguities or to make changes which do not adversely affect the interests of rights holders. The rights do not have any voting rights. PLAN OF DISTRIBUTION The shares of common stock covered by this prospectus may be offered and sold from time to time by the selling security holders. The selling security holders will act independently of us in making decisions with respect to the timing, manner and size of each sale of the common stock covered hereby. The selling security holders may sell the shares being offered hereby on the Nasdaq National Market, or otherwise at prices and at terms then prevailing or at prices related to the then current market price or at negotiated prices. Shares may be sold by one or more of the following means of distribution: - Block trades in which the broker-dealer so engaged will attempt to sell such shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; - Purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus; - Over-the-counter distributions in accordance with the rules of the Nasdaq National Market; 17 - Ordinary brokerage transactions and transactions in which the broker solicits purchasers; and - Privately negotiated transactions. To the extent required, this prospectus may be amended and supplemented from time to time to describe a specific plan of distribution. In connection with distributions of the shares offered hereby, the selling security holders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of our common stock in the course of hedging the positions they assume with selling security holders. The selling security holders may also sell our common stock short and deliver the shares offered hereby to close out such short positions. The selling security holders may also enter into option or other transactions with broker-dealer or other financial institutions which require the delivery to such broker-dealers or other financial institution of shares offered hereby, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The selling security holders may also pledge the shares offered hereby to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution, may effect sales of the pledged shares pursuant to this prospectus (as supplemented or amended to reflect such transaction). In addition, any shares offered hereby that qualify for sale pursuant to Rule 144 may, at the option of the holder thereof, be sold under Rule 144 rather than pursuant to this prospectus. Any broker-dealer participating in such transactions as agent may receive commissions from the selling security holders (and, if acting as agent for the purchaser of such shares, from such purchaser). The selling security holders will pay usual and customary brokerage fees. Broker-dealers may agree with the selling security holders to sell a specified number of shares at a stipulated price per share, and, to the extent such a broker-dealer is unable to do so acting as agent for the selling security holders, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to the selling security holders. Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time in transactions (which may involve crosses and block transactions and which may involve sales to and through other broker-dealers, including transactions of the nature described above) in the over-the-counter market, in negotiated transactions or by a combination of such methods of sale or otherwise at market prices prevailing at the time of sale or at negotiated prices, and in connection with such resales may pay to or receive from the purchasers of such shares commissions computed as described above. We have advised the selling security holders that the anti-manipulation provisions of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling security holders and their affiliates. In addition, we will make copies of this prospectus available to the selling security holders and have informed them of the need for delivery of copies of this prospectus to purchasers on or prior to sales of the shares offered hereby. The selling security holders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act. Any commissions paid or any discounts or concessions allowed to any such broker-dealers, and any profits received on the resale of such shares, may be deemed to be underwriting discounts and commissions under the Securities Act if any such broker-dealers purchase shares as principal. In order to comply with state securities laws, if applicable, the common stock will be sold only through registered or licensed brokers or dealers in jurisdictions having this requirement. In addition, where required by state law, the common stock may not be sold unless such shares have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. 18 There can be no assurance that the selling security holders will sell all or any of the shares of common stock offered under this prospectus. LEGAL MATTERS The validity of our Common Stock offered hereby has been passed upon by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. As of the date of this Prospectus, members of Wilson Sonsini Goodrich & Rosati, Professional Corporation, who have represented us in connection with this offering, beneficially own approximately 113,750 shares of the our common stock. Mario M. Rosati, a Director and Secretary of Genus, is a member of Wilson Sonsini Goodrich & Rosati, Professional Corporation. EXPERTS The financial statements incorporated by reference to the Annual Report on Form 10-K/A2 for the year ended December 31, 2000, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-3/A, of which this prospectus is a part, under the Securities Act with respect to the shares of common stock offered hereby. This prospectus does not contain all of the information included in the registration statement. Statements in this prospectus concerning the provisions of any document are not necessarily complete. You should refer to the copies of the documents filed as exhibits to the registration statement and those listed below in the section entitled, Information Incorporated by Reference. Each statement concerning these documents is qualified in its entirety by such reference. We are subject to the informational requirements of the Exchange Act and, accordingly, file reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy statements and other information regarding us. The address of the SEC website is http://www.sec.gov. Copies of our reports, proxy statements and other information also may be inspected and copied at the public reference facilities maintained by the SEC at: Judiciary Plaza Citicorp Center Seven World Trade Center Room 1024 500 West Madison Street 13th Floor 450 Fifth Street, N.W. Suite 1400 New York, NY 10048 Washington, D.C. 20549 Chicago, IL 60661 Copies of these materials can also be obtained by mail at prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. Our reports, proxy statements and other public filings may also be inspected at: The National Association of Securities Dealers 1735 K Street, N.W. Washington, D.C. 20006 19 INFORMATION INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you in this document by referring you to other filings we have made with the SEC. The information incorporated by reference is considered to be part of this prospectus, and later information filed with the SEC will update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the completion of the offering covered by this prospectus: (1) Registration Statements on Form 8-A filed with the Commission on August 26, 1988, May 3, 1990 and October 3, 2000. (2) Annual Report on Form 10-K for the fiscal year ended December 31, 2000 filed with the Commission on April 2, 2001, and amendments to the Annual Report on Form 10-K/A and Form 10-K/A2, respectively, for the fiscal year ended December 31, 2000 and filed with the Commission on July 20, 2001 and August 7, 2001, respectively. (3) Proxy Statement filed as of April 30, 2001 in connection with the Annual Meeting of Shareholders held on May 24, 2001. (4) Current reports on Form 8-K filed with the Commission on April 11, 2001 and May 23, 2001. (5) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2001 and June 30, 2001 filed with the Commission on May 15, 2001 and August 14, 2001, respectively. (6) Press Releases issued by Genus on the following dates: August 8, 2001, announcing that the second quarter 2001 produced a favorable book-to-bill ratio and penetration into a new market; August 2, 2001, announcing the filing of counterclaims against ASMI for patent infringement and antitrust violations; August 1, 2001, announcing results for the second quarter 2001; June 19, 2001, announcing the hiring of Weil, Gotshal and Manges to defend Genus against ASMI patent infringement allegations; June 14, 2001, announcing a new customer in Japan for Genus' atomic layer deposition systems; June 7, 2001, announcing Genus' rejection of ASMI's patent infringement allegations. We will provide without charge to any person, including any beneficial holder, to whom a copy of this prospectus is delivered, upon the written or oral request of any such person, a copy of any document described above (other than exhibits). Requests for such copies should be directed to Genus, Inc. at our principal offices located at 1139 Karlstad Drive, Sunnyvale, California 94089, telephone (408) 747-7120, attention: Investor Relations. PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth the various expenses in connection with the sale and distribution of the securities being registered, other than underwriting discounts and commissions. All of the amounts shown are estimates except the Securities and Exchange Commission registration fee and the Nasdaq National Market listing fee. Securities and Exchange Commission registration fee $ 6,536 Nasdaq National Market listing fee $ 17,500 Legal fees and expenses $ 50,000 Accounting fees and expenses $ 75,000 Transfer agent and registrar fees and expenses $ 3,750 Miscellaneous $ 5,000 Total $ 157,786 ========= Item 15. Indemnification of Directors and Officers Section 317 of the California General Corporation Law authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers who are parties or are threatened to be made parties to any proceeding (with certain exceptions) by reason of the fact that the person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with the proceeding if that person acted in good faith and in a manner the person reasonably believed to be in the best interests of the corporation. This limitation on liability has no effect on a directors' liability (i) for acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions that a director believes to be contrary to the best interests of the corporation or its security holders or that involve the absence of good faith on the part of the director, (iii) relating to any transaction from which a director derived an improper personal benefit, (iv) for acts or omissions that show a reckless disregard for the director's duty to the corporation or its security holders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of a serious injury to the corporation or its security holders, (v) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the directors' duty to the corporation or its security holders, (vi) under Section 310 of the California General Corporation Law (concerning contracts or transactions between the corporation and a director) or (vii) under Section 316 of the California General Corporation Law (directors' liability for improper dividends, loans and guarantees). The provision does not extend to acts or omissions of a director in his capacity as an officer. Further, the provision has no effect on claims arising under federal or state securities laws and does not affect the availability of injunctions and other equitable remedies available to the Company's security holders for any violation of a director's fiduciary duty to the Company or its security holders. Although the validity and scope of the legislation underlying the provision have not yet been interpreted to any significant extent by the California courts, the provision may relieve directors of monetary liability to the Company for grossly negligent conduct, including conduct in situations involving attempted takeovers of the Company. In accordance with Section 317, our Restated Articles of Incorporation, as amended (the "Articles"), limit the liability of a director to Genus or our security holders for monetary damages to the fullest extent permissible under California law, and authorizes Genus to provide indemnification to it agents (including officers and directors), subject to the limitations set forth above. Our Bylaws further provide for II-1 indemnification of corporate agents to the maximum extent permitted by the California General Corporation Law. Pursuant to the authority provided in the Articles, we have entered into indemnification agreements with each of our officers and directors, indemnifying them against potential liabilities that may arise as a result of their service and providing for other protection. We also maintain insurance policies that insure our officers and directors against liabilities arising from their positions. The foregoing summaries are necessarily subject to the complete text of the statute, the Articles, the Bylaws and the agreements referred to above and are qualified in their entirety by reference thereto. Reference is made to the Securities Purchase Agreement incorporated by reference as an exhibit to the Registration Statement for provisions regarding indemnification of our officers, directors and controlling persons against liabilities, including liabilities under the Securities Act. Item 16. Exhibits Exhibit Number Description of Document - ------------- ----------------------- 4.1* Securities Purchase Agreement between Genus, Inc. and the purchasers named in the Selling Security Holders section above. 4.2* Form of Stock Purchase Warrants between Genus, Inc. and the purchasers named in the Selling Security Holders section above (Exhibit A to the Securities Purchase Agreement). 4.3* Registration Rights Agreement between Genus, Inc. and the purchasers named in the Selling Security Holders section above (Exhibit B to the Securities Purchase Agreement). 4.4 Stock Purchase Warrants between Genus, Inc. and Placement Agents. 4.5* Opinion of Company Counsel (Exhibit C to the Securities Purchase Agreement). 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 23.1 Consent of Independent Accountants. 23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1 filed herewith). 24.1 Power of Attorney (see page II-5) - ----------------------------------- * Denotes exhibit has been previously filed. Item 17. Undertakings 1. The undersigned Registrant hereby undertakes: (a) To file, during any period in which offers or sale are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; II-2 (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that the undertakings set forth in paragraph (i) and (ii) above shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange of 1934 (the "Exchange Act") that are incorporated by reference in this Registration Statement. (b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering. 2. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. Insofar as indemnification of liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registration of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 4. The undersigned Registrant hereby undertakes that: (a) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (b) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to II-3 the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3/A3 and has duly caused this amended registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California, on August 14, 2001. GENUS, INC. By: /s/ Kenneth Schwanda ---------------------- Kenneth Schwanda Vice President, Finance and Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Mario M. Rosati and Mark Casillas, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendment to this Registration Statement on Form S-3, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: SIGNATURE TITLE DATE /s/ William W.R. Elder ---------------------- (William W.R. Elder) Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) August 14, 2001 /s/Kenneth Schwanda - ------------------- (Kenneth Schwanda) Vice President, Finance and Chief Financial Officer (Principal Financial and Principal Accounting Officer) August 14, 2001 /s/ Todd S. Myhre - ----------------- (Todd S. Myhre) Director August 14, 2001 /s/ Mario M. Rosati - ------------------- (Mario M. Rosati) Director and Secretary August 14, 2001 /s/ G. Frederick Forsyth - ------------------------ (G. Frederick Forsyth) Director August 14, 2001 /s/ George D. Wells - ------------------- (George D. Wells) Director August 14, 2001 /s/ Robert J. Richardson - ------------------------ (Robert J. Richardson) Director August 14, 2001 II-5 INDEX TO EXHIBITS Exhibit Description of Document ------- ----------------------- 4.1* Securities Purchase Agreement between Genus, Inc. and the purchasers named in the Selling Security Holders section above. 4.2* Form of Stock Purchase Warrants between Genus, Inc. and the purchasers named in the Selling Securities Holders section above (Exhibit A to the Securities Purchase Agreement). 4.3* Registration Rights Agreement between Genus, Inc. and the purchasers named in the Selling Securities Holders section above (Exhibit B to the Securities Purchase Agreement). 4.4 Stock Purchase Warrants between Genus, Inc. and Placement Agents. 4.5* Opinion of Company Counsel (Exhibit C to the Securities Purchase Agreement). 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 23.1 Consent of Independent Accountants. 23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1 filed herewith). 24.1 Power of Attorney (see page II-5) _____________________ *Denotes exhibit has been previously filed. EX-4.4 3 doc2.txt EXHIBIT 4.4 THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. May 14, 2001 WARRANT To Subscribe for and Purchase 47,869 Shares of Common Stock of GENUS, INC. VOID AFTER 5:00 P.M., CALIFORNIA TIME, ON MAY 13, 2006, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., CALIFORNIA TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY No. Placement Agent 1 THIS CERTIFIES that, for good and valuable consideration, WELLS FARGO VAN KASPER ("WFVK"), or registered assigns (the "Warrantholder"), is entitled to subscribe for and purchase from GENUS, INC., a California corporation (the "Company"), at a price of $3.00 per share (such price, as from time to time to be adjusted as hereinafter provided, being hereinafter called the "Warrant Price"), at any time and from time to time prior to the Expiration Date (as defined below), up to 47,869 fully paid, nonassessable shares of Common Stock, no par value, of the Company ("Common Stock"), subject, however, to the provisions and upon the terms and conditions hereinafter set forth, including without limitation the provisions of Section 2 hereof. "Expiration Date" shall mean 5:00 P.M., California time, on May 13, 2006, or if not a Business Day, as defined herein, at 5:00 P.M., California time, on the immediately preceding business day. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which banks in the State of California are authorized by law to remain closed. Section 1. Exercise of Warrant (a) Cash Exercise This Warrant may be exercised, at any time and from time to time prior to the Expiration Date, by the Warrantholder, in whole or in part (but not as to a fractional share of Common Stock and in no event for less than 500 shares (unless less than an aggregate of 500 shares are then purchasable under all outstanding Warrants held by a Warrantholder), by the completion of the subscription form attached hereto and by the surrender of this Warrant (properly endorsed) at the Company's offices at 1139 Karlstad Drive, Sunnyvale, CA 94089 (or at such other location in the United States as the Company may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company), and by payment to the Company of the Warrant Price, in cash or by certified or official bank check, for each share being purchased. (b) Net Exercise Notwithstanding anything to the contrary contained in Section 1(a) and subject to the last sentence of this Section 1(b), the Warrantholder may elect to exercise this Warrant and receive shares on a "net exercise" basis in an amount equal to the value of this Warrant by delivery of the subscription form attached hereto and surrender of this Warrant at the principal office of the Company, in which event the Company shall issue to Holder a number of shares computed using the following formula: X = (P)(Y)(A-B) ----------- A Where: X = the number of shares of Common Stock to be issued to Holder. P = the portion of the Warrant being exercised. Y = the number of shares of Common Stock issuable upon exercise of this Warrant if the Warrant were exercised for cash. A = the Current Market Price (as determined pursuant to Section 1(d)) of one share of Common Stock. B = Warrant Price. Notwithstanding anything in this Warrant to the contrary, the provisions of this Section 1(b) shall not be applicable if, at the time of exercise of this Warrant, a registration statement under the Securities Act of 1933 covering the resale of the shares issued upon such exercise is in effect. (c) Procedure for Exercise In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the total number of whole shares of Common Stock so purchased, registered in the name of the Warrantholder, shall be delivered to the Warrantholder within a reasonable time, not exceeding five Business Days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Warrantholder within such time. With respect to any such exercise, the Warrantholder shall for all purposes be deemed to have become the holder of record of the number of shares of Common Stock evidenced by such certificate or certificates from the date on which this Warrant was surrendered and if exercise is pursuant to Section 1(a), payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends on the Common Stock issued upon such exercise. If any fractional interest in a share of Common Stock would, except for the provisions of this Section 1, be delivered upon any such exercise, the Company, in lieu of delivering the fractional share thereof, shall pay to the Warrantholder an amount in cash equal to the Current Market Price of such fractional interest, as determined below. (d) Current Market Price For any computation hereunder, the "Current Market Price" per share of Common Stock on any date shall be deemed to be the average of the daily Market Price per share for the 30 consecutive Trading Days commencing 45 Trading Days before the date in question. "Market Price" is defined as the closing bid price of such security on the principal United States securities exchange or trading market on which such security is listed or traded as reported by the Research Service of Nasdaq Trading and Market Services (or a comparable reporting service of national reputation), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Nasdaq, or, if no sale price is reported for such security by Nasdaq, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If Market Price cannot be established as described above, Market Price shall be the fair market value of the Common Stock as determined in good faith by the Board of Directors. The term "Trading Day" shall mean a day on which Nasdaq or the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business. Section 2. Adjustments The Warrant Price and the number and kind of shares issuable hereunder shall be subject to adjustment from time to time upon the happening of certain events as provided in this Section 2. (a) Adjustments Generally (1) If at any time prior to the exercise of this Warrant in full, the Company shall (A) declare a dividend or make a distribution on the Common Stock payable in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class); (B) subdivide, reclassify or recapitalize its outstanding Common Stock into a greater number of shares; (C) combine, reclassify or recapitalize its outstanding Common Stock into a smaller number of shares; or (D) issue any shares of its capital stock by reclassification of its Common Stock (excluding any such reclassification in connection with a consolidation or a merger), the Warrant Price in effect at the time of the record date of such dividend, distribution, subdivision, combination, reclassification or recapitalization shall be adjusted so that the Warrant Price shall be equal to the price determined by multiplying the Warrant Price in effect immediately prior to such event by a fraction, the numerator of which shall be (x) the total number of outstanding shares of Common Stock of the Company immediately prior to such event; and the denominator of which shall be (y) the total number of outstanding shares of Common Stock of the Company immediately after such event and, as so adjusted or readjusted, the Warrant Price shall remain in effect until a further adjustment or readjustment is required by this Section 2. Whenever the Warrant Price is adjusted pursuant to this Section 2(a)(1), the shares issuable hereunder shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the Warrant immediately prior to such event by the Warrant Price in effect on the date thereof and dividing the product so obtained by the Warrant Price resulting from such adjustment. Any adjustment required by this Section 2(a)(1) shall be made successively immediately after the record date, in the case of a dividend or distribution, or the effective date, in the case of a subdivision, combination, reclassification or recapitalization, to allow the purchase of such aggregate number and kind of shares. (2) If at any time prior to the exercise of this Warrant in full, the Company shall make a distribution to all holders of the Common Stock of stock of a subsidiary or other corporation or securities convertible into or exercisable for such stock, then in lieu of an adjustment in the Warrant Price or the number of shares of Common Stock purchasable upon the exercise of this Warrant, the Warrantholder, upon the exercise hereof at any time after such distribution, shall be entitled to receive from the Company the stock or other securities to which the Warrantholder would have been entitled if the Warrantholder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 2, and the Company shall reserve, for the life of the Warrant, such securities of such subsidiary or other corporation; provided, however, that no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of this Warrant or upon its exercise. (3) If at any time prior to the expiration of this Warrant in full, the Company shall issue rights or warrants to all holders of Common Stock as such entitling them to subscribe for or purchase Common Stock at a price per share less than the Current Market Price per share on such record date, then, in each such case the number of shares subject to this Warrant thereafter purchasable upon the exercise of this Warrant shall be determined by multiplying the number of shares of Common Stock theretofore purchasable upon exercise of this Warrant by a fraction, the numerator of which shall be (x) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be (y) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares that the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the Current Market Price on such record date. For purposes of this Section 2(a)(3), the issuance of rights or warrants to subscribe for or purchase securities convertible into Common Stock shall be deemed to be the issuance of rights or warrants to purchase the Common Stock into which such securities are convertible at an aggregate offering price equal to the aggregate offering price of such securities plus the minimum aggregate amount (if any) payable upon conversion of such securities into Common Stock. In addition to the adjustment in the number of shares in this Section 2(a)(3), the Warrant Price per share shall be appropriately adjusted so that the aggregate Warrant Price shall remain constant. (4) If at any time prior to the exercise of this Warrant in full, the Company shall distribute to all holders of its Common Stock evidence of indebtedness of the Company or assets of the Company (excluding cash dividends or distributions out of earned surplus) or rights or warrants to subscribe for securities of the Company (excluding those referred to in Section 2(a)(3) above), then in each case the Warrant Price shall be adjusted to a price determined by multiplying the Warrant Price in effect immediately prior to such distribution by a fraction, the numerator of which shall be (x) the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution, less the then fair value (as reasonably determined by the Board of Directors of the Company, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common stock, and the denominator of which shall be (y) the Current Market Price per share of Common Stock; provided, however, that if the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution is less than the then fair value of the portion of the assets or evidence of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common Stock, the foregoing adjustment of the Warrant Price shall not be made and in lieu thereof the number of shares purchasable upon exercise of each Warrant immediately prior to such distribution shall be adjusted so that the holder of such Warrant shall be entitled to receive upon exercise of such Warrant the kind and number of assets, evidence of indebtedness, subscription rights and warrants (or, in the event of the redemption of such evidence of indebtedness, subscription rights or warrants, any cash paid in respect of such redemption) that such Warrantholder would have owned or have been entitled to receive in such distribution had such Warrant been exercised immediately prior to the record date of such distribution. (5) For purposes of any computation under this Section 2(a), the Current Market Price per share of Common Stock on any date shall be deemed calculated as provided in Section 1(d). (6) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($.05) in such price; provided, however, that any adjustments which by reason of this Section 2(a)(6) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 2(a) shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. Notwithstanding anything in this Section 2(a) to the contrary, the Warrant Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. (7) In the event that at any time, as the result of any adjustment made pursuant to this Section 2(a), the Warrantholder thereafter shall become entitled to receive any securities other than Common Stock, thereafter the number of such other securities so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 2(a). (b) No Adjustment for Dividends Except as provided in Section 2(a) of this Agreement, no adjustment in respect of any cash dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. (c) Preservation of Purchase Rights in Certain Transactions In case of any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall execute an agreement with the Warrantholder whereby the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property which the Warrantholder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Warrantholder, notice of the execution of any such agreement. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2. The provisions of this Section 2 shall similarly apply to successive consolidations, mergers, sales or conveyances. The Warrantholder shall be under no duty or responsibility to determine the correctness of any provisions contained in any such agreement relating either to the kind or amount of shares of stock or other securities or property receivable upon exercise of warrants or with respect to the method employed and provided therein for any adjustments. (d) Form of Warrant After Adjustments The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number or kind of the shares purchasable pursuant to this Warrant, and Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued; provided, however, that the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof. Any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate may be in the form so changed. (e) Treatment of Warrantholder Prior to due presentment for registration of transfer of this Warrant, the Company may deem and treat the Warrantholder as the absolute owner of this Warrant (notwithstanding any notation of ownership or other writing hereon) for all purposes and shall not be affected by any notice to the contrary. (f) Notice of Adjustment Upon any adjustment under this Section 2, then and in each such case the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to the Warrantholder at the address of such holder as shown on the books of the Company, which notice shall state the Warrant Price and the number or kind of the shares purchasable pursuant to this Warrant resulting from such adjustment, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (g) Stock to Be Reserved The Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of this Warrant as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of this Warrant. The Company covenants that all shares of Common Stock which shall be so issued, upon full payment of the Warrant Price therefore or as otherwise set forth herein, shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Company covenants that it will from time to time take all such action as may be required to ensure that the par value per share, if any, of the Common Stock is at all times equal to or less than the effective Warrant Price. The Company will take all such action as may be necessary to ensure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or automated quotation system upon which the Common Stock of the Company may be listed. The Company will not take any action that results in any adjustment under this Section 2, if the total number of shares of Common Stock issued and issuable after such action upon exercise of this Warrant would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. The Company has not granted and will not grant any right of first refusal with respect to shares issuable upon exercise of this Warrant, and there are no preemptive rights associated with such shares. (h) Issue Tax The issuance of certificates for shares of Common Stock upon exercise of any Warrant shall be made without a charge to the Warrantholder for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Warrantholder. (i) Closing of Books The Company will at no time close its transfer books against the transfer of the shares of Common Stock issued or issuable upon the exercise of this Warrant in any manner that interferes with the timely exercise of this Warrant. (j) Definition of Common Stock As used herein the term "Common Stock" shall mean and include the Common Stock, par value $0.01, of the Company as authorized on the date hereof, or shares of any class or classes resulting from any recapitalization or reclassification thereof which are not limited to any fixed sum or percentage and are not subject to redemption by the Company and in case at any time there shall be more than one such resulting class, the shares of each class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassification bears to the total number of shares of all such classes resulting from all such reclassification. Section 3 Market Stand Off The Warrantholder hereby agrees that, during the period of duration (up to, but not exceeding 180 days or the period agreed to by the Company's officers and directors, whichever is less) specified by the Company and an underwriter of Common Stock or other equity securities of the Company, following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock included in such registration. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the securities of the Warrantholder until the end of such period, and the Warrantholder agrees that, if so requested, the Warrantholder will execute an agreement in the form provided by the underwriter containing terms which are essentially consistent with the provisions of this Section. Section 4. Registration Rights The Company and the Warrantholder hereby adopt, incorporate and make a part of this Agreement each of the provisions, rights, duties, obligations, representations, conditions and responsibilities of the respective parties to that certain Registration Rights Agreement dated as of May 14, 2001 (the "Registration Rights Agreement") by and between the Company and the Initial Investors (as defined in the Registration Rights Agreement) as though Warrantholder was party to the Registration Rights Agreement as an Initial Investor and as though such Registration Rights Agreement were fully set forth herein with the following exceptions: (a) As used in the Registration Rights Agreement (i) "Investors" shall mean Warrantholder; (ii) "Registrable Securities" shall mean the shares of Common Stock issuable upon exercise of this Warrant and any shares of capital stock issued or issuable, from time to time (with any adjustments), as a distribution on or in exchange for or otherwise with respect to thereto; and (b) The provisions of the second paragraph of Section 2(c) of the Registration Rights Agreement entitled "Payments by the Company" shall be inapplicable. Section 5. Notices of Record Dates In the event of: (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution (other than cash dividends out of earned surplus), or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any right to sell shares of stock of any class or any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other corporation or entity, or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will give notice to the Warrantholder specifying (1) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and stating the amount and character of such dividend, distribution or right, and (2) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be given at least 20 days and not more than 90 days prior to the date therein specified, and such notice shall state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of stockholders, if either is required. Failure to mail or receive such notice or any defect therein shall not affect the validity of any action with respect thereto. Section 6. No Stockholders Rights or Liabilities This Warrant shall not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the Warrantholder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder for the Warrant Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. Section 7. Lost, Stolen, Mutilated or Destroyed Warrant In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and an agreement of indemnity, if requested. Section 8. Notices All notices, requests and other communications required or permitted to be given or delivered hereunder shall be in writing, and shall be delivered, or shall be sent by certified or registered mail or overnight courier, postage prepaid, or by facsimile, (a) If to a Warrantholder or a holder of shares issued upon exercise of this Warrant, addressed to Wells Fargo Van Kasper 600 California St., Suite 1700 San Francisco, CA 94108 Telephone No.: (415) 391-5600 Facsimile No.: (415) 397-2744 Attention: Robert L. Quist Managing Director (b) If to the Company addressed to it If to the Company: Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Telephone No.: (408) 747-7120 Facsimile No.: (408) (408) 747-7120 Facsimile No.: (408) 747-7198 Attention: Mr. Kenneth Schwanda With a copy to: Wilson Sonsini Goodrich & Rosati, PC 650 Page Mill Road Palo Alto, CA 94304 Telephone No.: (650) 493-9300 Facsimile No.: (650) 493-6811 Attention: Mark Casillas, Esq. Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. Section 9. Representations and Warranties of Warrantholder. (a) Acquisition for Own Account. Warrantholder is acquiring the Warrant and the shares of Common Stock upon exercise thereof ("Securities") for Warrantholder's own account and not with a present view towards the distribution thereof. Warrantholder understands that Warrantholder must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available, and that the Company has no present intention of registering any of the Securities other than as contemplated by the Registration Rights Agreement. Notwithstanding anything in this Section 8(a) to the contrary, by making the foregoing representation, Warrantholder does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the Securities Act and any applicable state securities laws. (b) Information. Warrantholder has been furnished all materials relating to the business, finances and operations of the Company and materials relating to the issuance of the Securities, which have been requested by Warrantholder. Warrantholder has been afforded the opportunity to ask questions of the Company and has received what Warrantholder believes to be satisfactory answers to any such inquiries. Warrantholder understands that its investment in the Securities involves a high degree of risk. (c) Governmental Review. Warrantholder understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. (d) Authorization; Enforcement. Warrantholder has the requisite power and authority to enter into and perform its obligations under this Warrant and to purchase the shares in accordance with the terms hereof. This Warrant has been duly and validly authorized, executed and delivered on behalf of Warrantholder and is a valid and binding agreement of Warrantholder enforceable against Warrantholder in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (e) Transfer or Resale. Warrantholder understands that (i) except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be transferred unless (A) subsequently registered thereunder, or (B) Warrantholder shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred under an exemption from such registration, or (C) sold under Rule 144 promulgated under the Securities Act (or a successor rule), or (D) sold or transferred to an employee or other affiliate of Warrantholder pursuant to an exemption under the Securities Act; and (ii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder, in each case, other than pursuant to the Registration Rights Agreement. (f) Legend. Warrantholder understands that this Warrant and the shares of Common Stock issuable upon exercise of this Warrant and, until such time as the shares of Common Stock issuable upon exercise of this Warrant have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold by Warrantholder under Rule 144, the certificates for the shares may bear a restrictive legend in substantially the following form: These securities have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state of the United States. The securities represented hereby may not be offered or sold in the absence of an effective registration statement for the securities under applicable securities laws unless offered, sold or transferred under an available exemption from the registration requirements of those laws. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if (a) the sale of such Security is registered under the Securities Act or (b) in connection with the resale of such Security, such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act or (c) such holder provides the Company with reasonable assurances that such Security can be sold under Rule 144(k). Warrantholder agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, pursuant to an effective registration statement or under an exemption from the registration requirements of the Securities Act. (g). Accredited Investor Status. Warrantholder is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D. Section 10. Amendments and Waivers This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Section 11. Severability If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. Section 12. Governing Law THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. Section 13. Headings The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect any of the terms hereof. Section 14. Counterparts This Warrant may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company and WFVK have executed this Warrant on and as of the day and year first above written. GENUS, INC., a California corporation By: /s/ William W. R. Elder Name: William W. R. Elder Its: Chairman, President and Chief Executive Officer Attest: _______________________ WELLS FARGO VAN KASPER By: /s/ John H. Chung John H. Chung Its: Chief Operating Officer SUBSCRIPTION FORM (To be executed upon exercise of this Warrant) Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Attention: ________________ The undersigned hereby irrevocably elects to exercise the right of purchaser represented by the within Warrant for, and to purchase thereunder, ______________ shares of Common Stock, as provided for therein, and either tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $_____________ or, if the undersigned elects pursuant to Section 1(b) of the within Warrant to convert such Warrant into Common Stock a net issuance basis, the undersigned exercises the within Warrant by exchange under the terms of Section 1(b). Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional share to: Name:______________________________ Address: Social Security No: If said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher number of shares. Name_______________________________ Signature____________________________ Note: The above signature must correspond exactly with the name on the first page of this Warrant or with the name of the assignee appearing in the assignment form below. ASSIGNMENT (To be executed only upon assignment of Warrant) For value received, _______________________________ hereby sells, assigns and transfers unto _______________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________ attorney, to transfer said Warrant on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises: Name(s) of Assignee(s)/Address No. of Warrants And if said number of Warrants shall not be all the Warrants represented by the Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant. Name_______________________ Dated: __________________ Signature____________________ Note: The above signature must correspond exactly with the name on the face of this Warrant - -------------------------------------------------------------------------------- THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. May 14, 2001 WARRANT To Subscribe for and Purchase 83,669 Shares of Common Stock of GENUS, INC. VOID AFTER 5:00 P.M., CALIFORNIA TIME, ON MAY 13, 2006, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., CALIFORNIA TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY No. Placement Agent 2 THIS CERTIFIES that, for good and valuable consideration, Wells Fargo Van Kasper ("WFVK"), or registered assigns (the "Warrantholder"), is entitled to subscribe for and purchase from GENUS, INC., a California corporation (the "Company"), at a price of $ 5.24 per share (such price, as from time to time to be adjusted as hereinafter provided, being hereinafter called the "Warrant Price"), at any time and from time to time prior to the Expiration Date (as defined below), up to 83,669 fully paid, nonassessable shares of Common Stock, no par value, of the Company ("Common Stock"), subject, however, to the provisions and upon the terms and conditions hereinafter set forth, including without limitation the provisions of Section 2 hereof. "Expiration Date" shall mean 5:00 P.M., California time, on May 13, 2006, or if not a Business Day, as defined herein, at 5:00 P.M., California time, on the immediately preceding business day. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which banks in the State of California are authorized by law to remain closed. Section 1. Exercise of Warrant (a) Cash Exercise This Warrant may be exercised, at any time and from time to time prior to the Expiration Date, by the Warrantholder, in whole or in part (but not as to a fractional share of Common Stock and in no event for less than 500 shares (unless less than an aggregate of 500 shares are then purchasable under all outstanding Warrants held by a Warrantholder), by the completion of the subscription form attached hereto and by the surrender of this Warrant (properly endorsed) at the Company's offices at 1139 Karlstad Drive, Sunnyvale, CA 94089 (or at such other location in the United States as the Company may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company), and by payment to the Company of the Warrant Price, in cash or by certified or official bank check, for each share being purchased. (b) Net Exercise Notwithstanding anything to the contrary contained in Section 1(a) and subject to the last sentence of this Section 1(b), the Warrantholder may elect to exercise this Warrant and receive shares on a "net exercise" basis in an amount equal to the value of this Warrant by delivery of the subscription form attached hereto and surrender of this Warrant at the principal office of the Company, in which event the Company shall issue to Holder a number of shares computed using the following formula: X = (P)(Y)(A-B) ----------- A Where: X = the number of shares of Common Stock to be issued to Holder. P = the portion of the Warrant being exercised. Y = the number of shares of Common Stock issuable upon exercise of this Warrant if the Warrant were exercised for cash. A = the Current Market Price (as determined pursuant to Section 1(d)) of one share of Common Stock. B = Warrant Price. Notwithstanding anything in this Warrant to the contrary, the provisions of this Section 1(b) shall not be applicable if, at the time of exercise of this Warrant, a registration statement under the Securities Act of 1933 covering the resale of the shares issued upon such exercise is in effect. (c) Procedure for Exercise In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the total number of whole shares of Common Stock so purchased, registered in the name of the Warrantholder, shall be delivered to the Warrantholder within a reasonable time, not exceeding five Business Days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Warrantholder within such time. With respect to any such exercise, the Warrantholder shall for all purposes be deemed to have become the holder of record of the number of shares of Common Stock evidenced by such certificate or certificates from the date on which this Warrant was surrendered and if exercise is pursuant to Section 1(a), payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends on the Common Stock issued upon such exercise. If any fractional interest in a share of Common Stock would, except for the provisions of this Section 1, be delivered upon any such exercise, the Company, in lieu of delivering the fractional share thereof, shall pay to the Warrantholder an amount in cash equal to the Current Market Price of such fractional interest, as determined below. (d) Current Market Price For any computation hereunder, the "Current Market Price" per share of Common Stock on any date shall be deemed to be the average of the daily Market Price per share for the 30 consecutive Trading Days commencing 45 Trading Days before the date in question. "Market Price" is defined as the closing bid price of such security on the principal United States securities exchange or trading market on which such security is listed or traded as reported by the Research Service of Nasdaq Trading and Market Services (or a comparable reporting service of national reputation), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Nasdaq, or, if no sale price is reported for such security by Nasdaq, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If Market Price cannot be established as described above, Market Price shall be the fair market value of the Common Stock as determined in good faith by the Board of Directors. The term "Trading Day" shall mean a day on which Nasdaq or the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business. Section 2. Adjustments The Warrant Price and the number and kind of shares issuable hereunder shall be subject to adjustment from time to time upon the happening of certain events as provided in this Section 2. (a) Adjustments Generally (1) If at any time prior to the exercise of this Warrant in full, the Company shall (A) declare a dividend or make a distribution on the Common Stock payable in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class); (B) subdivide, reclassify or recapitalize its outstanding Common Stock into a greater number of shares; (C) combine, reclassify or recapitalize its outstanding Common Stock into a smaller number of shares; or (D) issue any shares of its capital stock by reclassification of its Common Stock (excluding any such reclassification in connection with a consolidation or a merger), the Warrant Price in effect at the time of the record date of such dividend, distribution, subdivision, combination, reclassification or recapitalization shall be adjusted so that the Warrant Price shall be equal to the price determined by multiplying the Warrant Price in effect immediately prior to such event by a fraction, the numerator of which shall be (x) the total number of outstanding shares of Common Stock of the Company immediately prior to such event; and the denominator of which shall be (y) the total number of outstanding shares of Common Stock of the Company immediately after such event and, as so adjusted or readjusted, the Warrant Price shall remain in effect until a further adjustment or readjustment is required by this Section 2. Whenever the Warrant Price is adjusted pursuant to this Section 2(a)(1), the shares issuable hereunder shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the Warrant immediately prior to such event by the Warrant Price in effect on the date thereof and dividing the product so obtained by the Warrant Price resulting from such adjustment. Any adjustment required by this Section 2(a)(1) shall be made successively immediately after the record date, in the case of a dividend or distribution, or the effective date, in the case of a subdivision, combination, reclassification or recapitalization, to allow the purchase of such aggregate number and kind of shares. (2) If at any time prior to the exercise of this Warrant in full, the Company shall make a distribution to all holders of the Common Stock of stock of a subsidiary or other corporation or securities convertible into or exercisable for such stock, then in lieu of an adjustment in the Warrant Price or the number of shares of Common Stock purchasable upon the exercise of this Warrant, the Warrantholder, upon the exercise hereof at any time after such distribution, shall be entitled to receive from the Company the stock or other securities to which the Warrantholder would have been entitled if the Warrantholder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 2, and the Company shall reserve, for the life of the Warrant, such securities of such subsidiary or other corporation; provided, however, that no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of this Warrant or upon its exercise. (3) If at any time prior to the expiration of this Warrant in full, the Company shall issue rights or warrants to all holders of Common Stock as such entitling them to subscribe for or purchase Common Stock at a price per share less than the Current Market Price per share on such record date, then, in each such case the number of shares subject to this Warrant thereafter purchasable upon the exercise of this Warrant shall be determined by multiplying the number of shares of Common Stock theretofore purchasable upon exercise of this Warrant by a fraction, the numerator of which shall be (x) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be (y) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares that the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the Current Market Price on such record date. For purposes of this Section 2(a)(3), the issuance of rights or warrants to subscribe for or purchase securities convertible into Common Stock shall be deemed to be the issuance of rights or warrants to purchase the Common Stock into which such securities are convertible at an aggregate offering price equal to the aggregate offering price of such securities plus the minimum aggregate amount (if any) payable upon conversion of such securities into Common Stock. In addition to the adjustment in the number of shares in this Section 2(a)(3), the Warrant Price per share shall be appropriately adjusted so that the aggregate Warrant Price shall remain constant. (4) If at any time prior to the exercise of this Warrant in full, the Company shall distribute to all holders of its Common Stock evidence of indebtedness of the Company or assets of the Company (excluding cash dividends or distributions out of earned surplus) or rights or warrants to subscribe for securities of the Company (excluding those referred to in Section 2(a)(3) above), then in each case the Warrant Price shall be adjusted to a price determined by multiplying the Warrant Price in effect immediately prior to such distribution by a fraction, the numerator of which shall be (x) the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution, less the then fair value (as reasonably determined by the Board of Directors of the Company, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common stock, and the denominator of which shall be (y) the Current Market Price per share of Common Stock; provided, however, that if the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution is less than the then fair value of the portion of the assets or evidence of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common Stock, the foregoing adjustment of the Warrant Price shall not be made and in lieu thereof the number of shares purchasable upon exercise of each Warrant immediately prior to such distribution shall be adjusted so that the holder of such Warrant shall be entitled to receive upon exercise of such Warrant the kind and number of assets, evidence of indebtedness, subscription rights and warrants (or, in the event of the redemption of such evidence of indebtedness, subscription rights or warrants, any cash paid in respect of such redemption) that such Warrantholder would have owned or have been entitled to receive in such distribution had such Warrant been exercised immediately prior to the record date of such distribution. (5) For purposes of any computation under this Section 2(a), the Current Market Price per share of Common Stock on any date shall be deemed calculated as provided in Section 1(d). (6) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($.05) in such price; provided, however, that any adjustments which by reason of this Section 2(a)(6) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 2(a) shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. Notwithstanding anything in this Section 2(a) to the contrary, the Warrant Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. (7) In the event that at any time, as the result of any adjustment made pursuant to this Section 2(a), the Warrantholder thereafter shall become entitled to receive any securities other than Common Stock, thereafter the number of such other securities so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 2(a). (b) No Adjustment for Dividends Except as provided in Section 2(a) of this Agreement, no adjustment in respect of any cash dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. (c) Preservation of Purchase Rights in Certain Transactions In case of any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall execute an agreement with the Warrantholder whereby the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property which the Warrantholder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Warrantholder, notice of the execution of any such agreement. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2. The provisions of this Section 2 shall similarly apply to successive consolidations, mergers, sales or conveyances. The Warrantholder shall be under no duty or responsibility to determine the correctness of any provisions contained in any such agreement relating either to the kind or amount of shares of stock or other securities or property receivable upon exercise of warrants or with respect to the method employed and provided therein for any adjustments. (d) Form of Warrant After Adjustments The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number or kind of the shares purchasable pursuant to this Warrant, and Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued; provided, however, that the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof. Any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate may be in the form so changed. (e) Treatment of Warrantholder Prior to due presentment for registration of transfer of this Warrant, the Company may deem and treat the Warrantholder as the absolute owner of this Warrant (notwithstanding any notation of ownership or other writing hereon) for all purposes and shall not be affected by any notice to the contrary. (f) Notice of Adjustment Upon any adjustment under this Section 2, then and in each such case the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to the Warrantholder at the address of such holder as shown on the books of the Company, which notice shall state the Warrant Price and the number or kind of the shares purchasable pursuant to this Warrant resulting from such adjustment, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (g) Stock to Be Reserved The Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of this Warrant as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of this Warrant. The Company covenants that all shares of Common Stock which shall be so issued, upon full payment of the Warrant Price therefore or as otherwise set forth herein, shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Company covenants that it will from time to time take all such action as may be required to ensure that the par value per share, if any, of the Common Stock is at all times equal to or less than the effective Warrant Price. The Company will take all such action as may be necessary to ensure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or automated quotation system upon which the Common Stock of the Company may be listed. The Company will not take any action that results in any adjustment under this Section 2, if the total number of shares of Common Stock issued and issuable after such action upon exercise of this Warrant would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. The Company has not granted and will not grant any right of first refusal with respect to shares issuable upon exercise of this Warrant, and there are no preemptive rights associated with such shares. (h) Issue Tax The issuance of certificates for shares of Common Stock upon exercise of any Warrant shall be made without a charge to the Warrantholder for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Warrantholder. (i) Closing of Books The Company will at no time close its transfer books against the transfer of the shares of Common Stock issued or issuable upon the exercise of this Warrant in any manner that interferes with the timely exercise of this Warrant. (j) Definition of Common Stock As used herein the term "Common Stock" shall mean and include the Common Stock, par value $0.01, of the Company as authorized on the date hereof, or shares of any class or classes resulting from any recapitalization or reclassification thereof which are not limited to any fixed sum or percentage and are not subject to redemption by the Company and in case at any time there shall be more than one such resulting class, the shares of each class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassification bears to the total number of shares of all such classes resulting from all such reclassification. Section 3 Market Stand Off The Warrantholder hereby agrees that, during the period of duration (up to, but not exceeding 180 days or the period agreed to by the Company's officers and directors, whichever is less) specified by the Company and an underwriter of Common Stock or other equity securities of the Company, following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock included in such registration. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the securities of the Warrantholder until the end of such period, and the Warrantholder agrees that, if so requested, the Warrantholder will execute an agreement in the form provided by the underwriter containing terms which are essentially consistent with the provisions of this Section. Section 4. Registration Rights The Company and the Warrantholder hereby adopt, incorporate and make a part of this Agreement each of the provisions, rights, duties, obligations, representations, conditions and responsibilities of the respective parties to that certain Registration Rights Agreement dated as of May 14, 2001 (the "Registration Rights Agreement") by and between the Company and the Initial Investors (as defined in the Registration Rights Agreement) as though Warrantholder was party to the Registration Rights Agreement as an Initial Investor and as though such Registration Rights Agreement were fully set forth herein with the following exceptions: (a) As used in the Registration Rights Agreement (i) "Investors" shall mean Warrantholder; (ii) "Registrable Securities" shall mean the shares of Common Stock issuable upon exercise of this Warrant and any shares of capital stock issued or issuable, from time to time (with any adjustments), as a distribution on or in exchange for or otherwise with respect to thereto; and (b) The provisions of the second paragraph of Section 2(c) of the Registration Rights Agreement entitled "Payments by the Company" shall be inapplicable. Section 5. Notices of Record Dates In the event of: (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution (other than cash dividends out of earned surplus), or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any right to sell shares of stock of any class or any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other corporation or entity, or (d) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will give notice to the Warrantholder specifying (1) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and stating the amount and character of such dividend, distribution or right, and (2) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be given at least 20 days and not more than 90 days prior to the date therein specified, and such notice shall state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of stockholders, if either is required. Failure to mail or receive such notice or any defect therein shall not affect the validity of any action with respect thereto. Section 6. No Stockholders Rights or Liabilities This Warrant shall not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the Warrantholder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder for the Warrant Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. Section 7. Lost, Stolen, Mutilated or Destroyed Warrant In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and an agreement of indemnity, if requested. Section 8. Notices All notices, requests and other communications required or permitted to be given or delivered hereunder shall be in writing, and shall be delivered, or shall be sent by certified or registered mail or overnight courier, postage prepaid, or by facsimile, (a) If to a Warrantholder or a holder of shares issued upon exercise of this Warrant, addressed to Wells Fargo Van Kasper 600 California St., Suite 1700 San Francisco, CA 94108 Telephone No.: (415) 391-5600 Facsimile No.: (415) 397-2744 Attention: Robert L. Quist Managing Director (b) If to the Company addressed to it If to the Company: Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Telephone No.: (408) 747-7120 Facsimile No.: (408) (408) 747-7120 Facsimile No.: (408) 747-7198 Attention: Mr. Kenneth Schwanda With a copy to: Wilson Sonsini Goodrich & Rosati, PC 650 Page Mill Road Palo Alto, CA 94304 Telephone No.: (650) 493-9300 Facsimile No.: (650) 493-6811 Attention: Mark Casillas, Esq. Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. Section 9. Representations and Warranties of Warrantholder. (a) Acquisition for Own Account. Warrantholder is acquiring the Warrant and the shares of Common Stock upon exercise thereof ("Securities") for Warrantholder's own account and not with a present view towards the distribution thereof. Warrantholder understands that Warrantholder must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available, and that the Company has no present intention of registering any of the Securities other than as contemplated by the Registration Rights Agreement. Notwithstanding anything in this Section 8(a) to the contrary, by making the foregoing representation, Warrantholder does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the Securities Act and any applicable state securities laws. (b) Information. Warrantholder has been furnished all materials relating to the business, finances and operations of the Company and materials relating to the issuance of the Securities, which have been requested by Warrantholder. Warrantholder has been afforded the opportunity to ask questions of the Company and has received what Warrantholder believes to be satisfactory answers to any such inquiries. Warrantholder understands that its investment in the Securities involves a high degree of risk. (c) Governmental Review. Warrantholder understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. (d) Authorization; Enforcement. Warrantholder has the requisite power and authority to enter into and perform its obligations under this Warrant and to purchase the shares in accordance with the terms hereof. This Warrant has been duly and validly authorized, executed and delivered on behalf of Warrantholder and is a valid and binding agreement of Warrantholder enforceable against Warrantholder in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (e) Transfer or Resale. Warrantholder understands that (i) except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be transferred unless (A) subsequently registered thereunder, or (B) Warrantholder shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred under an exemption from such registration, or (C) sold under Rule 144 promulgated under the Securities Act (or a successor rule), or (D) sold or transferred to an employee or other affiliate of Warrantholder pursuant to an exemption under the Securities Act; and (ii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder, in each case, other than pursuant to the Registration Rights Agreement. (f) Legend. Warrantholder understands that this Warrant and the shares of Common Stock issuable upon exercise of this Warrant and, until such time as the shares of Common Stock issuable upon exercise of this Warrant have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold by Warrantholder under Rule 144, the certificates for the shares may bear a restrictive legend in substantially the following form: These securities have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state of the United States. The securities represented hereby may not be offered or sold in the absence of an effective registration statement for the securities under applicable securities laws unless offered, sold or transferred under an available exemption from the registration requirements of those laws. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if (a) the sale of such Security is registered under the Securities Act or (b) in connection with the resale of such Security, such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act or (c) such holder provides the Company with reasonable assurances that such Security can be sold under Rule 144(k). Warrantholder agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, pursuant to an effective registration statement or under an exemption from the registration requirements of the Securities Act. (g). Accredited Investor Status. Warrantholder is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D. Section 10. Amendments and Waivers This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Section 11. Severability If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. Section 12. Governing Law THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. Section 13. Headings The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect any of the terms hereof. Section 14. Counterparts This Warrant may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company and WFVK have executed this Warrant on and as of the day and year first above written. GENUS, INC., a California corporation By: /s/ William W. R. Elder Name: William W. R. Elder Its: Chairman, President and Chief Executive Officer Attest: _______________________ WELLS FARGO VAN KASPER By: /s/ John H. Chung John H. Chung Its: Chief Operating Officer SUBSCRIPTION FORM (To be executed upon exercise of this Warrant) Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Attention: ________________ The undersigned hereby irrevocably elects to exercise the right of purchaser represented by the within Warrant for, and to purchase thereunder, ______________ shares of Common Stock, as provided for therein, and either tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $_____________ or, if the undersigned elects pursuant to Section 1(b) of the within Warrant to convert such Warrant into Common Stock a net issuance basis, the undersigned exercises the within Warrant by exchange under the terms of Section 1(b). Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional share to: Name:______________________________ Address: Social Security No: If said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher number of shares. Name_______________________________ Signature____________________________ Note: The above signature must correspond exactly with the name on the first page of this Warrant or with the name of the assignee appearing in the assignment form below. ASSIGNMENT (To be executed only upon assignment of Warrant) For value received, _______________________________ hereby sells, assigns and transfers unto _______________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________ attorney, to transfer said Warrant on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises: Name(s) of Assignee(s)/Address No. of Warrants And if said number of Warrants shall not be all the Warrants represented by the Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant. Name_______________________ Dated: __________________ Signature____________________ Note: The above signature must correspond exactly with the name on the face of this Warrant - -------------------------------------------------------------------------------- THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. May 14, 2001 WARRANT To Subscribe for and Purchase 21,506 Shares of Common Stock of GENUS, INC. VOID AFTER 5:00 P.M., CALIFORNIA TIME, ON MAY 13, 2006, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., CALIFORNIA TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY No. Placement Agent 3 THIS CERTIFIES that, for good and valuable consideration, BURNHAM SECURITIES INC. ("Burnham"), or registered assigns (the "Warrantholder"), is entitled to subscribe for and purchase from GENUS, INC., a California corporation (the "Company"), at a price of $ 3.00 per share (such price, as from time to time to be adjusted as hereinafter provided, being hereinafter called the "Warrant Price"), at any time and from time to time prior to the Expiration Date (as defined below), up to 21,506 fully paid, nonassessable shares of Common Stock, no par value, of the Company ("Common Stock"), subject, however, to the provisions and upon the terms and conditions hereinafter set forth, including without limitation the provisions of Section 2 hereof. "Expiration Date" shall mean 5:00 P.M., California time, on May 13, 2006, or if not a Business Day, as defined herein, at 5:00 P.M., California time, on the immediately preceding business day. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which banks in the State of California are authorized by law to remain closed. Section 1. Exercise of Warrant (a) Cash Exercise This Warrant may be exercised, at any time and from time to time prior to the Expiration Date, by the Warrantholder, in whole or in part (but not as to a fractional share of Common Stock and in no event for less than 500 shares (unless less than an aggregate of 500 shares are then purchasable under all outstanding Warrants held by a Warrantholder), by the completion of the subscription form attached hereto and by the surrender of this Warrant (properly endorsed) at the Company's offices at 1139 Karlstad Drive, Sunnyvale, CA 94089 (or at such other location in the United States as the Company may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company), and by payment to the Company of the Warrant Price, in cash or by certified or official bank check, for each share being purchased. (b) Net Exercise Notwithstanding anything to the contrary contained in Section 1(a) and subject to the last sentence of this Section 1(b), the Warrantholder may elect to exercise this Warrant and receive shares on a "net exercise" basis in an amount equal to the value of this Warrant by delivery of the subscription form attached hereto and surrender of this Warrant at the principal office of the Company, in which event the Company shall issue to Holder a number of shares computed using the following formula: X = (P)(Y)(A-B) ----------- A Where: X = the number of shares of Common Stock to be issued to Holder. P = the portion of the Warrant being exercised. Y = the number of shares of Common Stock issuable upon exercise of this Warrant if the Warrant were exercised for cash. A = the Current Market Price (as determined pursuant to Section 1(d)) of one share of Common Stock. B = Warrant Price. Notwithstanding anything in this Warrant to the contrary, the provisions of this Section 1(b) shall not be applicable if, at the time of exercise of this Warrant, a registration statement under the Securities Act of 1933 covering the resale of the shares issued upon such exercise is in effect. (c) Procedure for Exercise In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the total number of whole shares of Common Stock so purchased, registered in the name of the Warrantholder, shall be delivered to the Warrantholder within a reasonable time, not exceeding five Business Days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Warrantholder within such time. With respect to any such exercise, the Warrantholder shall for all purposes be deemed to have become the holder of record of the number of shares of Common Stock evidenced by such certificate or certificates from the date on which this Warrant was surrendered and if exercise is pursuant to Section 1(a), payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends on the Common Stock issued upon such exercise. If any fractional interest in a share of Common Stock would, except for the provisions of this Section 1, be delivered upon any such exercise, the Company, in lieu of delivering the fractional share thereof, shall pay to the Warrantholder an amount in cash equal to the Current Market Price of such fractional interest, as determined below. (d) Current Market Price For any computation hereunder, the "Current Market Price" per share of Common Stock on any date shall be deemed to be the average of the daily Market Price per share for the 30 consecutive Trading Days commencing 45 Trading Days before the date in question. "Market Price" is defined as the closing bid price of such security on the principal United States securities exchange or trading market on which such security is listed or traded as reported by the Research Service of Nasdaq Trading and Market Services (or a comparable reporting service of national reputation), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Nasdaq, or, if no sale price is reported for such security by Nasdaq, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If Market Price cannot be established as described above, Market Price shall be the fair market value of the Common Stock as determined in good faith by the Board of Directors. The term "Trading Day" shall mean a day on which Nasdaq or the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business. Section 2. Adjustments The Warrant Price and the number and kind of shares issuable hereunder shall be subject to adjustment from time to time upon the happening of certain events as provided in this Section 2. (a) Adjustments Generally (1) If at any time prior to the exercise of this Warrant in full, the Company shall (A) declare a dividend or make a distribution on the Common Stock payable in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class); (B) subdivide, reclassify or recapitalize its outstanding Common Stock into a greater number of shares; (C) combine, reclassify or recapitalize its outstanding Common Stock into a smaller number of shares; or (D) issue any shares of its capital stock by reclassification of its Common Stock (excluding any such reclassification in connection with a consolidation or a merger), the Warrant Price in effect at the time of the record date of such dividend, distribution, subdivision, combination, reclassification or recapitalization shall be adjusted so that the Warrant Price shall be equal to the price determined by multiplying the Warrant Price in effect immediately prior to such event by a fraction, the numerator of which shall be (x) the total number of outstanding shares of Common Stock of the Company immediately prior to such event; and the denominator of which shall be (y) the total number of outstanding shares of Common Stock of the Company immediately after such event and, as so adjusted or readjusted, the Warrant Price shall remain in effect until a further adjustment or readjustment is required by this Section 2. Whenever the Warrant Price is adjusted pursuant to this Section 2(a)(1), the shares issuable hereunder shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the Warrant immediately prior to such event by the Warrant Price in effect on the date thereof and dividing the product so obtained by the Warrant Price resulting from such adjustment. Any adjustment required by this Section 2(a)(1) shall be made successively immediately after the record date, in the case of a dividend or distribution, or the effective date, in the case of a subdivision, combination, reclassification or recapitalization, to allow the purchase of such aggregate number and kind of shares. (2) If at any time prior to the exercise of this Warrant in full, the Company shall make a distribution to all holders of the Common Stock of stock of a subsidiary or other corporation or securities convertible into or exercisable for such stock, then in lieu of an adjustment in the Warrant Price or the number of shares of Common Stock purchasable upon the exercise of this Warrant, the Warrantholder, upon the exercise hereof at any time after such distribution, shall be entitled to receive from the Company the stock or other securities to which the Warrantholder would have been entitled if the Warrantholder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 2, and the Company shall reserve, for the life of the Warrant, such securities of such subsidiary or other corporation; provided, however, that no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of this Warrant or upon its exercise. (3) If at any time prior to the expiration of this Warrant in full, the Company shall issue rights or warrants to all holders of Common Stock as such entitling them to subscribe for or purchase Common Stock at a price per share less than the Current Market Price per share on such record date, then, in each such case the number of shares subject to this Warrant thereafter purchasable upon the exercise of this Warrant shall be determined by multiplying the number of shares of Common Stock theretofore purchasable upon exercise of this Warrant by a fraction, the numerator of which shall be (x) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be (y) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares that the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the Current Market Price on such record date. For purposes of this Section 2(a)(3), the issuance of rights or warrants to subscribe for or purchase securities convertible into Common Stock shall be deemed to be the issuance of rights or warrants to purchase the Common Stock into which such securities are convertible at an aggregate offering price equal to the aggregate offering price of such securities plus the minimum aggregate amount (if any) payable upon conversion of such securities into Common Stock. In addition to the adjustment in the number of shares in this Section 2(a)(3), the Warrant Price per share shall be appropriately adjusted so that the aggregate Warrant Price shall remain constant. (4) If at any time prior to the exercise of this Warrant in full, the Company shall distribute to all holders of its Common Stock evidence of indebtedness of the Company or assets of the Company (excluding cash dividends or distributions out of earned surplus) or rights or warrants to subscribe for securities of the Company (excluding those referred to in Section 2(a)(3) above), then in each case the Warrant Price shall be adjusted to a price determined by multiplying the Warrant Price in effect immediately prior to such distribution by a fraction, the numerator of which shall be (x) the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution, less the then fair value (as reasonably determined by the Board of Directors of the Company, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common stock, and the denominator of which shall be (y) the Current Market Price per share of Common Stock; provided, however, that if the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution is less than the then fair value of the portion of the assets or evidence of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common Stock, the foregoing adjustment of the Warrant Price shall not be made and in lieu thereof the number of shares purchasable upon exercise of each Warrant immediately prior to such distribution shall be adjusted so that the holder of such Warrant shall be entitled to receive upon exercise of such Warrant the kind and number of assets, evidence of indebtedness, subscription rights and warrants (or, in the event of the redemption of such evidence of indebtedness, subscription rights or warrants, any cash paid in respect of such redemption) that such Warrantholder would have owned or have been entitled to receive in such distribution had such Warrant been exercised immediately prior to the record date of such distribution. (5) For purposes of any computation under this Section 2(a), the Current Market Price per share of Common Stock on any date shall be deemed calculated as provided in Section 1(d). (6) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($.05) in such price; provided, however, that any adjustments which by reason of this Section 2(a)(6) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 2(a) shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. Notwithstanding anything in this Section 2(a) to the contrary, the Warrant Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. (7) In the event that at any time, as the result of any adjustment made pursuant to this Section 2(a), the Warrantholder thereafter shall become entitled to receive any securities other than Common Stock, thereafter the number of such other securities so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 2(a). (b) No Adjustment for Dividends Except as provided in Section 2(a) of this Agreement, no adjustment in respect of any cash dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. (c) Preservation of Purchase Rights in Certain Transactions In case of any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall execute an agreement with the Warrantholder whereby the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property which the Warrantholder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Warrantholder, notice of the execution of any such agreement. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2. The provisions of this Section 2 shall similarly apply to successive consolidations, mergers, sales or conveyances. The Warrantholder shall be under no duty or responsibility to determine the correctness of any provisions contained in any such agreement relating either to the kind or amount of shares of stock or other securities or property receivable upon exercise of warrants or with respect to the method employed and provided therein for any adjustments. (d) Form of Warrant After Adjustments The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number or kind of the shares purchasable pursuant to this Warrant, and Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued; provided, however, that the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof. Any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate may be in the form so changed. (e) Treatment of Warrantholder Prior to due presentment for registration of transfer of this Warrant, the Company may deem and treat the Warrantholder as the absolute owner of this Warrant (notwithstanding any notation of ownership or other writing hereon) for all purposes and shall not be affected by any notice to the contrary. (f) Notice of Adjustment Upon any adjustment under this Section 2, then and in each such case the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to the Warrantholder at the address of such holder as shown on the books of the Company, which notice shall state the Warrant Price and the number or kind of the shares purchasable pursuant to this Warrant resulting from such adjustment, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (g) Stock to Be Reserved The Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of this Warrant as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of this Warrant. The Company covenants that all shares of Common Stock which shall be so issued, upon full payment of the Warrant Price therefore or as otherwise set forth herein, shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Company covenants that it will from time to time take all such action as may be required to ensure that the par value per share, if any, of the Common Stock is at all times equal to or less than the effective Warrant Price. The Company will take all such action as may be necessary to ensure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or automated quotation system upon which the Common Stock of the Company may be listed. The Company will not take any action that results in any adjustment under this Section 2, if the total number of shares of Common Stock issued and issuable after such action upon exercise of this Warrant would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. The Company has not granted and will not grant any right of first refusal with respect to shares issuable upon exercise of this Warrant, and there are no preemptive rights associated with such shares. (h) Issue Tax The issuance of certificates for shares of Common Stock upon exercise of any Warrant shall be made without a charge to the Warrantholder for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Warrantholder. (i) Closing of Books The Company will at no time close its transfer books against the transfer of the shares of Common Stock issued or issuable upon the exercise of this Warrant in any manner that interferes with the timely exercise of this Warrant. (j) Definition of Common Stock As used herein the term "Common Stock" shall mean and include the Common Stock, par value $0.01, of the Company as authorized on the date hereof, or shares of any class or classes resulting from any recapitalization or reclassification thereof which are not limited to any fixed sum or percentage and are not subject to redemption by the Company and in case at any time there shall be more than one such resulting class, the shares of each class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassification bears to the total number of shares of all such classes resulting from all such reclassification. Section 3 Market Stand Off The Warrantholder hereby agrees that, during the period of duration (up to, but not exceeding 180 days or the period agreed to by the Company's officers and directors, whichever is less) specified by the Company and an underwriter of Common Stock or other equity securities of the Company, following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock included in such registration. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the securities of the Warrantholder until the end of such period, and the Warrantholder agrees that, if so requested, the Warrantholder will execute an agreement in the form provided by the underwriter containing terms which are essentially consistent with the provisions of this Section. Section 4. Registration Rights The Company and the Warrantholder hereby adopt, incorporate and make a part of this Agreement each of the provisions, rights, duties, obligations, representations, conditions and responsibilities of the respective parties to that certain Registration Rights Agreement dated as of May 14, 2001 (the "Registration Rights Agreement") by and between the Company and the Initial Investors (as defined in the Registration Rights Agreement) as though Warrantholder was party to the Registration Rights Agreement as an Initial Investor and as though such Registration Rights Agreement were fully set forth herein with the following exceptions: (a) As used in the Registration Rights Agreement (i) "Investors" shall mean Warrantholder; (ii) "Registrable Securities" shall mean the shares of Common Stock issuable upon exercise of this Warrant and any shares of capital stock issued or issuable, from time to time (with any adjustments), as a distribution on or in exchange for or otherwise with respect to thereto; and (b) The provisions of the second paragraph of Section 2(c) of the Registration Rights Agreement entitled "Payments by the Company" shall be inapplicable. Section 5. Notices of Record Dates In the event of: (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution (other than cash dividends out of earned surplus), or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any right to sell shares of stock of any class or any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other corporation or entity, or (e) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will give notice to the Warrantholder specifying (1) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and stating the amount and character of such dividend, distribution or right, and (2) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be given at least 20 days and not more than 90 days prior to the date therein specified, and such notice shall state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of stockholders, if either is required. Failure to mail or receive such notice or any defect therein shall not affect the validity of any action with respect thereto. Section 6. No Stockholders Rights or Liabilities This Warrant shall not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the Warrantholder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder for the Warrant Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. Section 7. Lost, Stolen, Mutilated or Destroyed Warrant In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and an agreement of indemnity, if requested. Section 8. Notices All notices, requests and other communications required or permitted to be given or delivered hereunder shall be in writing, and shall be delivered, or shall be sent by certified or registered mail or overnight courier, postage prepaid, or by facsimile, (a) If to a Warrantholder or a holder of shares issued upon exercise of this Warrant, addressed to BURNHAM SECURITIES INC. 1325 Avenue of the Americas, 17th Floor, New York, NY 10019 Attention: President (b) If to the Company addressed to it If to the Company: Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Telephone No.: (408) 747-7120 Facsimile No.: (408) (408) 747-7120 Facsimile No.: (408) 747-7198 Attention: Mr. Kenneth Schwanda With a copy to: Wilson Sonsini Goodrich & Rosati, PC 650 Page Mill Road Palo Alto, CA 94304 Telephone No.: (650) 493-9300 Facsimile No.: (650) 493-6811 Attention: Mark Casillas, Esq. Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. Section 9. Representations and Warranties of Warrantholder. (a) Acquisition for Own Account. Warrantholder is acquiring the Warrant and the shares of Common Stock upon exercise thereof ("Securities") for Warrantholder's own account and not with a present view towards the distribution thereof. Warrantholder understands that Warrantholder must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available, and that the Company has no present intention of registering any of the Securities other than as contemplated by the Registration Rights Agreement. Notwithstanding anything in this Section 8(a) to the contrary, by making the foregoing representation, Warrantholder does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the Securities Act and any applicable state securities laws. (b) Information. Warrantholder has been furnished all materials relating to the business, finances and operations of the Company and materials relating to the issuance of the Securities, which have been requested by Warrantholder. Warrantholder has been afforded the opportunity to ask questions of the Company and has received what Warrantholder believes to be satisfactory answers to any such inquiries. Warrantholder understands that its investment in the Securities involves a high degree of risk. (c) Governmental Review. Warrantholder understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. (d) Authorization; Enforcement. Warrantholder has the requisite power and authority to enter into and perform its obligations under this Warrant and to purchase the shares in accordance with the terms hereof. This Warrant has been duly and validly authorized, executed and delivered on behalf of Warrantholder and is a valid and binding agreement of Warrantholder enforceable against Warrantholder in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (e) Transfer or Resale. Warrantholder understands that (i) except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be transferred unless (A) subsequently registered thereunder, or (B) Warrantholder shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred under an exemption from such registration, or (C) sold under Rule 144 promulgated under the Securities Act (or a successor rule), or (D) sold or transferred to an employee or other affiliate of Warrantholder pursuant to an exemption under the Securities Act; and (ii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder, in each case, other than pursuant to the Registration Rights Agreement. (f) Legend. Warrantholder understands that this Warrant and the shares of Common Stock issuable upon exercise of this Warrant and, until such time as the shares of Common Stock issuable upon exercise of this Warrant have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold by Warrantholder under Rule 144, the certificates for the shares may bear a restrictive legend in substantially the following form: These securities have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state of the United States. The securities represented hereby may not be offered or sold in the absence of an effective registration statement for the securities under applicable securities laws unless offered, sold or transferred under an available exemption from the registration requirements of those laws. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if (a) the sale of such Security is registered under the Securities Act or (b) in connection with the resale of such Security, such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act or (c) such holder provides the Company with reasonable assurances that such Security can be sold under Rule 144(k). Warrantholder agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, pursuant to an effective registration statement or under an exemption from the registration requirements of the Securities Act. (g). Accredited Investor Status. Warrantholder is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D. Section 10. Amendments and Waivers This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Section 11. Severability If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. Section 12. Governing Law THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. Section 13. Headings The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect any of the terms hereof. Section 14. Counterparts This Warrant may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company and WFVK have executed this Warrant on and as of the day and year first above written. GENUS, INC., a California corporation By: /s/ William W. R. Elder Name: William W. R. Elder Its: Chairman, President and Chief Executive Officer Attest: _______________________ BURNHAM SECURITIES INC. By: /s/John P. Rosenthal John P. Rosenthal Its: Senior V. P. Capital Markets SUBSCRIPTION FORM (To be executed upon exercise of this Warrant) Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Attention: ________________ The undersigned hereby irrevocably elects to exercise the right of purchaser represented by the within Warrant for, and to purchase thereunder, ______________ shares of Common Stock, as provided for therein, and either tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $_____________ or, if the undersigned elects pursuant to Section 1(b) of the within Warrant to convert such Warrant into Common Stock a net issuance basis, the undersigned exercises the within Warrant by exchange under the terms of Section 1(b). Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional share to: Name:______________________________ Address: Social Security No: If said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher number of shares. Name_______________________________ Signature____________________________ Note: The above signature must correspond exactly with the name on the first page of this Warrant or with the name of the assignee appearing in the assignment form below. ASSIGNMENT (To be executed only upon assignment of Warrant) For value received, _______________________________ hereby sells, assigns and transfers unto _______________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________ attorney, to transfer said Warrant on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises: Name(s) of Assignee(s)/Address No. of Warrants And if said number of Warrants shall not be all the Warrants represented by the Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant. Name_______________________ Dated: __________________ Signature____________________ Note: The above signature must correspond exactly with the name on the face of this Warrant THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. May 14, 2001 WARRANT To Subscribe for and Purchase 37,590 Shares of Common Stock of GENUS, INC. VOID AFTER 5:00 P.M., CALIFORNIA TIME, ON MAY 13, 2006, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., CALIFORNIA TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY No. Placement Agent 4 THIS CERTIFIES that, for good and valuable consideration, BURNHAM SECURITIES INC. ("Burnham"), or registered assigns (the "Warrantholder"), is entitled to subscribe for and purchase from GENUS, INC., a California corporation (the "Company"), at a price of $ 5.24 per share (such price, as from time to time to be adjusted as hereinafter provided, being hereinafter called the "Warrant Price"), at any time and from time to time prior to the Expiration Date (as defined below), up to 37,590 fully paid, nonassessable shares of Common Stock, no par value, of the Company ("Common Stock"), subject, however, to the provisions and upon the terms and conditions hereinafter set forth, including without limitation the provisions of Section 2 hereof. "Expiration Date" shall mean 5:00 P.M., California time, on May 13, 2006, or if not a Business Day, as defined herein, at 5:00 P.M., California time, on the immediately preceding business day. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which banks in the State of California are authorized by law to remain closed. Section 1. Exercise of Warrant (a) Cash Exercise This Warrant may be exercised, at any time and from time to time prior to the Expiration Date, by the Warrantholder, in whole or in part (but not as to a fractional share of Common Stock and in no event for less than 500 shares (unless less than an aggregate of 500 shares are then purchasable under all outstanding Warrants held by a Warrantholder), by the completion of the subscription form attached hereto and by the surrender of this Warrant (properly endorsed) at the Company's offices at 1139 Karlstad Drive, Sunnyvale, CA 94089 (or at such other location in the United States as the Company may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company), and by payment to the Company of the Warrant Price, in cash or by certified or official bank check, for each share being purchased. (b) Net Exercise Notwithstanding anything to the contrary contained in Section 1(a) and subject to the last sentence of this Section 1(b), the Warrantholder may elect to exercise this Warrant and receive shares on a "net exercise" basis in an amount equal to the value of this Warrant by delivery of the subscription form attached hereto and surrender of this Warrant at the principal office of the Company, in which event the Company shall issue to Holder a number of shares computed using the following formula: X = (P)(Y)(A-B) ----------- A Where: X = the number of shares of Common Stock to be issued to Holder. P = the portion of the Warrant being exercised. Y = the number of shares of Common Stock issuable upon exercise of this Warrant if the Warrant were exercised for cash. A = the Current Market Price (as determined pursuant to Section 1(d)) of one share of Common Stock. B = Warrant Price. Notwithstanding anything in this Warrant to the contrary, the provisions of this Section 1(b) shall not be applicable if, at the time of exercise of this Warrant, a registration statement under the Securities Act of 1933 covering the resale of the shares issued upon such exercise is in effect. (c) Procedure for Exercise In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the total number of whole shares of Common Stock so purchased, registered in the name of the Warrantholder, shall be delivered to the Warrantholder within a reasonable time, not exceeding five Business Days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Warrantholder within such time. With respect to any such exercise, the Warrantholder shall for all purposes be deemed to have become the holder of record of the number of shares of Common Stock evidenced by such certificate or certificates from the date on which this Warrant was surrendered and if exercise is pursuant to Section 1(a), payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends on the Common Stock issued upon such exercise. If any fractional interest in a share of Common Stock would, except for the provisions of this Section 1, be delivered upon any such exercise, the Company, in lieu of delivering the fractional share thereof, shall pay to the Warrantholder an amount in cash equal to the Current Market Price of such fractional interest, as determined below. (d) Current Market Price For any computation hereunder, the "Current Market Price" per share of Common Stock on any date shall be deemed to be the average of the daily Market Price per share for the 30 consecutive Trading Days commencing 45 Trading Days before the date in question. "Market Price" is defined as the closing bid price of such security on the principal United States securities exchange or trading market on which such security is listed or traded as reported by the Research Service of Nasdaq Trading and Market Services (or a comparable reporting service of national reputation), or if the foregoing does not apply, the last reported sale price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Nasdaq, or, if no sale price is reported for such security by Nasdaq, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If Market Price cannot be established as described above, Market Price shall be the fair market value of the Common Stock as determined in good faith by the Board of Directors. The term "Trading Day" shall mean a day on which Nasdaq or the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business. Section 2. Adjustments The Warrant Price and the number and kind of shares issuable hereunder shall be subject to adjustment from time to time upon the happening of certain events as provided in this Section 2. (a) Adjustments Generally (1) If at any time prior to the exercise of this Warrant in full, the Company shall (A) declare a dividend or make a distribution on the Common Stock payable in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class); (B) subdivide, reclassify or recapitalize its outstanding Common Stock into a greater number of shares; (C) combine, reclassify or recapitalize its outstanding Common Stock into a smaller number of shares; or (D) issue any shares of its capital stock by reclassification of its Common Stock (excluding any such reclassification in connection with a consolidation or a merger), the Warrant Price in effect at the time of the record date of such dividend, distribution, subdivision, combination, reclassification or recapitalization shall be adjusted so that the Warrant Price shall be equal to the price determined by multiplying the Warrant Price in effect immediately prior to such event by a fraction, the numerator of which shall be (x) the total number of outstanding shares of Common Stock of the Company immediately prior to such event; and the denominator of which shall be (y) the total number of outstanding shares of Common Stock of the Company immediately after such event and, as so adjusted or readjusted, the Warrant Price shall remain in effect until a further adjustment or readjustment is required by this Section 2. Whenever the Warrant Price is adjusted pursuant to this Section 2(a)(1), the shares issuable hereunder shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the Warrant immediately prior to such event by the Warrant Price in effect on the date thereof and dividing the product so obtained by the Warrant Price resulting from such adjustment. Any adjustment required by this Section 2(a)(1) shall be made successively immediately after the record date, in the case of a dividend or distribution, or the effective date, in the case of a subdivision, combination, reclassification or recapitalization, to allow the purchase of such aggregate number and kind of shares. (2) If at any time prior to the exercise of this Warrant in full, the Company shall make a distribution to all holders of the Common Stock of stock of a subsidiary or other corporation or securities convertible into or exercisable for such stock, then in lieu of an adjustment in the Warrant Price or the number of shares of Common Stock purchasable upon the exercise of this Warrant, the Warrantholder, upon the exercise hereof at any time after such distribution, shall be entitled to receive from the Company the stock or other securities to which the Warrantholder would have been entitled if the Warrantholder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 2, and the Company shall reserve, for the life of the Warrant, such securities of such subsidiary or other corporation; provided, however, that no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of this Warrant or upon its exercise. (3) If at any time prior to the expiration of this Warrant in full, the Company shall issue rights or warrants to all holders of Common Stock as such entitling them to subscribe for or purchase Common Stock at a price per share less than the Current Market Price per share on such record date, then, in each such case the number of shares subject to this Warrant thereafter purchasable upon the exercise of this Warrant shall be determined by multiplying the number of shares of Common Stock theretofore purchasable upon exercise of this Warrant by a fraction, the numerator of which shall be (x) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be (y) the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares that the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the Current Market Price on such record date. For purposes of this Section 2(a)(3), the issuance of rights or warrants to subscribe for or purchase securities convertible into Common Stock shall be deemed to be the issuance of rights or warrants to purchase the Common Stock into which such securities are convertible at an aggregate offering price equal to the aggregate offering price of such securities plus the minimum aggregate amount (if any) payable upon conversion of such securities into Common Stock. In addition to the adjustment in the number of shares in this Section 2(a)(3), the Warrant Price per share shall be appropriately adjusted so that the aggregate Warrant Price shall remain constant. (4) If at any time prior to the exercise of this Warrant in full, the Company shall distribute to all holders of its Common Stock evidence of indebtedness of the Company or assets of the Company (excluding cash dividends or distributions out of earned surplus) or rights or warrants to subscribe for securities of the Company (excluding those referred to in Section 2(a)(3) above), then in each case the Warrant Price shall be adjusted to a price determined by multiplying the Warrant Price in effect immediately prior to such distribution by a fraction, the numerator of which shall be (x) the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution, less the then fair value (as reasonably determined by the Board of Directors of the Company, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common stock, and the denominator of which shall be (y) the Current Market Price per share of Common Stock; provided, however, that if the then Current Market Price per share of Common Stock on the record date for determination of stockholders entitled to receive such distribution is less than the then fair value of the portion of the assets or evidence of indebtedness so distributed or of such subscription rights or warrants which are applicable to one share of Common Stock, the foregoing adjustment of the Warrant Price shall not be made and in lieu thereof the number of shares purchasable upon exercise of each Warrant immediately prior to such distribution shall be adjusted so that the holder of such Warrant shall be entitled to receive upon exercise of such Warrant the kind and number of assets, evidence of indebtedness, subscription rights and warrants (or, in the event of the redemption of such evidence of indebtedness, subscription rights or warrants, any cash paid in respect of such redemption) that such Warrantholder would have owned or have been entitled to receive in such distribution had such Warrant been exercised immediately prior to the record date of such distribution. (5) For purposes of any computation under this Section 2(a), the Current Market Price per share of Common Stock on any date shall be deemed calculated as provided in Section 1(d). (6) No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($.05) in such price; provided, however, that any adjustments which by reason of this Section 2(a)(6) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 2(a) shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. Notwithstanding anything in this Section 2(a) to the contrary, the Warrant Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. (7) In the event that at any time, as the result of any adjustment made pursuant to this Section 2(a), the Warrantholder thereafter shall become entitled to receive any securities other than Common Stock, thereafter the number of such other securities so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 2(a). (b) No Adjustment for Dividends Except as provided in Section 2(a) of this Agreement, no adjustment in respect of any cash dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. (c) Preservation of Purchase Rights in Certain Transactions In case of any consolidation of the Company with or merger of the Company into another corporation or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation, as the case may be, shall execute an agreement with the Warrantholder whereby the Warrantholder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property which the Warrantholder would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Warrantholder, notice of the execution of any such agreement. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2. The provisions of this Section 2 shall similarly apply to successive consolidations, mergers, sales or conveyances. The Warrantholder shall be under no duty or responsibility to determine the correctness of any provisions contained in any such agreement relating either to the kind or amount of shares of stock or other securities or property receivable upon exercise of warrants or with respect to the method employed and provided therein for any adjustments. (d) Form of Warrant After Adjustments The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number or kind of the shares purchasable pursuant to this Warrant, and Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued; provided, however, that the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof. Any Warrant certificate thereafter issued, whether upon registration of transfer of, or in exchange or substitution for, an outstanding Warrant certificate may be in the form so changed. (e) Treatment of Warrantholder Prior to due presentment for registration of transfer of this Warrant, the Company may deem and treat the Warrantholder as the absolute owner of this Warrant (notwithstanding any notation of ownership or other writing hereon) for all purposes and shall not be affected by any notice to the contrary. (f) Notice of Adjustment Upon any adjustment under this Section 2, then and in each such case the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to the Warrantholder at the address of such holder as shown on the books of the Company, which notice shall state the Warrant Price and the number or kind of the shares purchasable pursuant to this Warrant resulting from such adjustment, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (g) Stock to Be Reserved The Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of this Warrant as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of this Warrant. The Company covenants that all shares of Common Stock which shall be so issued, upon full payment of the Warrant Price therefore or as otherwise set forth herein, shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Company covenants that it will from time to time take all such action as may be required to ensure that the par value per share, if any, of the Common Stock is at all times equal to or less than the effective Warrant Price. The Company will take all such action as may be necessary to ensure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or automated quotation system upon which the Common Stock of the Company may be listed. The Company will not take any action that results in any adjustment under this Section 2, if the total number of shares of Common Stock issued and issuable after such action upon exercise of this Warrant would exceed the total number of shares of Common Stock then authorized by the Company's Certificate of Incorporation. The Company has not granted and will not grant any right of first refusal with respect to shares issuable upon exercise of this Warrant, and there are no preemptive rights associated with such shares. (h) Issue Tax The issuance of certificates for shares of Common Stock upon exercise of any Warrant shall be made without a charge to the Warrantholder for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Warrantholder. (i) Closing of Books The Company will at no time close its transfer books against the transfer of the shares of Common Stock issued or issuable upon the exercise of this Warrant in any manner that interferes with the timely exercise of this Warrant. (j) Definition of Common Stock As used herein the term "Common Stock" shall mean and include the Common Stock, par value $0.01, of the Company as authorized on the date hereof, or shares of any class or classes resulting from any recapitalization or reclassification thereof which are not limited to any fixed sum or percentage and are not subject to redemption by the Company and in case at any time there shall be more than one such resulting class, the shares of each class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassification bears to the total number of shares of all such classes resulting from all such reclassification. Section 3 Market Stand Off The Warrantholder hereby agrees that, during the period of duration (up to, but not exceeding 180 days or the period agreed to by the Company's officers and directors, whichever is less) specified by the Company and an underwriter of Common Stock or other equity securities of the Company, following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock included in such registration. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the securities of the Warrantholder until the end of such period, and the Warrantholder agrees that, if so requested, the Warrantholder will execute an agreement in the form provided by the underwriter containing terms which are essentially consistent with the provisions of this Section. Section 4. Registration Rights The Company and the Warrantholder hereby adopt, incorporate and make a part of this Agreement each of the provisions, rights, duties, obligations, representations, conditions and responsibilities of the respective parties to that certain Registration Rights Agreement dated as of May 14, 2001 (the "Registration Rights Agreement") by and between the Company and the Initial Investors (as defined in the Registration Rights Agreement) as though Warrantholder was party to the Registration Rights Agreement as an Initial Investor and as though such Registration Rights Agreement were fully set forth herein with the following exceptions: (a) As used in the Registration Rights Agreement (i) "Investors" shall mean Warrantholder; (ii) "Registrable Securities" shall mean the shares of Common Stock issuable upon exercise of this Warrant and any shares of capital stock issued or issuable, from time to time (with any adjustments), as a distribution on or in exchange for or otherwise with respect to thereto; and (b) The provisions of the second paragraph of Section 2(c) of the Registration Rights Agreement entitled "Payments by the Company" shall be inapplicable. Section 5. Notices of Record Dates In the event of: (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution (other than cash dividends out of earned surplus), or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any right to sell shares of stock of any class or any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other corporation or entity, or (f) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will give notice to the Warrantholder specifying (1) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and stating the amount and character of such dividend, distribution or right, and (2) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be given at least 20 days and not more than 90 days prior to the date therein specified, and such notice shall state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of stockholders, if either is required. Failure to mail or receive such notice or any defect therein shall not affect the validity of any action with respect thereto. Section 6. No Stockholders Rights or Liabilities This Warrant shall not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the Warrantholder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder for the Warrant Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. Section 7. Lost, Stolen, Mutilated or Destroyed Warrant In case the certificate or certificates evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and an agreement of indemnity, if requested. Section 8. Notices All notices, requests and other communications required or permitted to be given or delivered hereunder shall be in writing, and shall be delivered, or shall be sent by certified or registered mail or overnight courier, postage prepaid, or by facsimile, (a) If to a Warrantholder or a holder of shares issued upon exercise of this Warrant, addressed to BURNHAM SECURITIES INC. 1325 Avenue of the Americas, 17th Floor, New York, NY 10019 Attention: President (b) If to the Company addressed to it If to the Company: Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Telephone No.: (408) 747-7120 Facsimile No.: (408) (408) 747-7120 Facsimile No.: (408) 747-7198 Attention: Mr. Kenneth Schwanda With a copy to: Wilson Sonsini Goodrich & Rosati, PC 650 Page Mill Road Palo Alto, CA 94304 Telephone No.: (650) 493-9300 Facsimile No.: (650) 493-6811 Attention: Mark Casillas, Esq. Each party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. Section 9. Representations and Warranties of Warrantholder. (a) Acquisition for Own Account. Warrantholder is acquiring the Warrant and the shares of Common Stock upon exercise thereof ("Securities") for Warrantholder's own account and not with a present view towards the distribution thereof. Warrantholder understands that Warrantholder must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available, and that the Company has no present intention of registering any of the Securities other than as contemplated by the Registration Rights Agreement. Notwithstanding anything in this Section 8(a) to the contrary, by making the foregoing representation, Warrantholder does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the Securities Act and any applicable state securities laws. (b) Information. Warrantholder has been furnished all materials relating to the business, finances and operations of the Company and materials relating to the issuance of the Securities, which have been requested by Warrantholder. Warrantholder has been afforded the opportunity to ask questions of the Company and has received what Warrantholder believes to be satisfactory answers to any such inquiries. Warrantholder understands that its investment in the Securities involves a high degree of risk. (c) Governmental Review. Warrantholder understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. (d) Authorization; Enforcement. Warrantholder has the requisite power and authority to enter into and perform its obligations under this Warrant and to purchase the shares in accordance with the terms hereof. This Warrant has been duly and validly authorized, executed and delivered on behalf of Warrantholder and is a valid and binding agreement of Warrantholder enforceable against Warrantholder in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (e) Transfer or Resale. Warrantholder understands that (i) except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be transferred unless (A) subsequently registered thereunder, or (B) Warrantholder shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred under an exemption from such registration, or (C) sold under Rule 144 promulgated under the Securities Act (or a successor rule), or (D) sold or transferred to an employee or other affiliate of Warrantholder pursuant to an exemption under the Securities Act; and (ii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder, in each case, other than pursuant to the Registration Rights Agreement. (f) Legend. Warrantholder understands that this Warrant and the shares of Common Stock issuable upon exercise of this Warrant and, until such time as the shares of Common Stock issuable upon exercise of this Warrant have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold by Warrantholder under Rule 144, the certificates for the shares may bear a restrictive legend in substantially the following form: These securities have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state of the United States. The securities represented hereby may not be offered or sold in the absence of an effective registration statement for the securities under applicable securities laws unless offered, sold or transferred under an available exemption from the registration requirements of those laws. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if (a) the sale of such Security is registered under the Securities Act or (b) in connection with the resale of such Security, such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act or (c) such holder provides the Company with reasonable assurances that such Security can be sold under Rule 144(k). Warrantholder agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, pursuant to an effective registration statement or under an exemption from the registration requirements of the Securities Act. (g). Accredited Investor Status. Warrantholder is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D. Section 10. Amendments and Waivers This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Section 11. Severability If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. Section 12. Governing Law THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. Section 13. Headings The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect any of the terms hereof. Section 14. Counterparts This Warrant may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company and WFVK have executed this Warrant on and as of the day and year first above written. GENUS, INC., a California corporation By: /s/ William W. R. Elder Name: William W. R. Elder Its: Chairman, President and Chief Executive Officer Attest: _______________________ BURNHAM SECURITIES INC. By: /s/John P. Rosenthal John P. Rosenthal Its: Senior V. P. Capital Markets SUBSCRIPTION FORM (To be executed upon exercise of this Warrant) Genus, Inc. 1139 Karlstad Drive Sunnyvale, CA 94089 Attention: ________________ The undersigned hereby irrevocably elects to exercise the right of purchaser represented by the within Warrant for, and to purchase thereunder, ______________ shares of Common Stock, as provided for therein, and either tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $_____________ or, if the undersigned elects pursuant to Section 1(b) of the within Warrant to convert such Warrant into Common Stock a net issuance basis, the undersigned exercises the within Warrant by exchange under the terms of Section 1(b). Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional share to: Name:______________________________ Address: Social Security No: If said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher number of shares. Name_______________________________ Signature____________________________ Note: The above signature must correspond exactly with the name on the first page of this Warrant or with the name of the assignee appearing in the assignment form below. ASSIGNMENT (To be executed only upon assignment of Warrant) For value received, _______________________________ hereby sells, assigns and transfers unto _______________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________ attorney, to transfer said Warrant on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises: Name(s) of Assignee(s)/Address No. of Warrants And if said number of Warrants shall not be all the Warrants represented by the Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant. Name_______________________ Dated: __________________ Signature____________________ Note: The above signature must correspond exactly with the name on the face of this Warrant EX-5.1 4 doc3.txt EXHIBIT 5.1 [Letterhead] August 14, 2001 Genus, Inc. 1139 Karlstad Drive Sunnyvale, California 94089 Re: Registration Statement on Form S-3/A3 Ladies and Gentlemen: We have examined the registration statement on Form S-3/A3 to be filed with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended, of a resale offering of 2,541,785 shares of your common stock and 1,461,525 shares of common stock to be issued upon the exercise of warrants to purchase your common stock. We have examined the proceedings taken in connection with the sale and issuance of the above-referenced shares and warrants. It is our opinion that (i) the shares have been legally and validly issued and are fully paid and non-assessable, and (ii) the warrants have been legally and validly issued, and upon in accordance with the terms and provisions in the warrants, the common shares issued upon exercise of the warrants will be legally and validly issued, and will be fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the registration statement, and further consent to the use of our name wherever appearing in the registration statement, including the prospectus constituting a part thereof, and any amendment thereto. Very truly yours, WILSON SONSINI GOODRICH & ROSATI Professional Corporation /s/ WILSON SONSINI GOODRICH & ROSATI EX-23.1 5 doc4.txt EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3/A3 of our report dated February 12, 2001, except as to the second paragraph of Note 6, which is as of March 28, 2001 and our report dated February 12, 2001, relating to the financial statements and financial statement schedule, respectively, which appear in Genus, Inc.'s Annual Report on Form 10-K/A2 for the year ended December 31, 2000. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP - -------------------------------- San Jose, California August 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----